City can prosper out of the EU

THE Bank of England now thinks the City will be better off not having free access to Europe after all. Mark Carney, the outgoing Governor of the Bank, not only acknowledged in an interview that the UK should not agree to align its financial regulations with those of the EU, he went further. He called for the Government not to compromise on this to try to get preferential trade terms.

This is an extraordinary volteface for he was part of the

Project Fear camp before the 2016 referendum, but it makes a lot of sense. It varies from market to market, but as a rule of thumb Europe accounts for about 20 per cent of London’s financial services business. So much better to focus on the 80 per cent, which would be at risk if the City had European rules imposed on it.

In any case, London can serve the European market by setting up local subsidiaries, or by its European customers setting up UK offices to access the City. So far there has been only a trickle of UK jobs being relocated to Europe, despite fears thousands would go. In some services such as foreign exchange, London has actually been increasing its share of the global market.

It has also been paying more tax. Last financial year, UK financial services paid £75 billion in tax, an all-time record, accounting for 11 per cent of the Government’s revenues.

The key point is the City is extremely innovative. Innovation can be stifled by regulation. The two great bursts of development in finance of the past 60 years have been London’s invention of the Eurodollar market in the 1960s and the ‘Big Bang’ reforms from 1986 onwards. In the first case, London took advantage of new US regulations, by providing a way round a new US tax – the Interest Equalization Tax – in 1963. In the second, it took advantage of the freeing of UK domestic regulations such as the Stock Exchange’s fixed commissions and the jobber/ broker distinction. That cleared the way to increasing its international business.

Current innovation includes the burst of new services known as fintech – applying technology to create and deliver financial services online, ranging from crowd-funding to robotic investment advice. Some of these services are a bit ropey. But others will change the world. London has the largest single global cluster of successful fintech companies, with 17 of the top 50 located here.

As we report on page 99, this new Government will take a more positive attitude to finance. Of course, there have been huge failings in the industry. We need to be vigilant. But we now have a Chancellor, Sajid Javid, who understands global finance backwards, having spent 18 years working in banking in New York, Latin America, and Singapore as well as London before he went into politics.

We will also have a new Governor, Andrew Bailey, who understands the City backwards, having spent more than 30 years working at the Bank. There will be tension between the two – indeed there should be, because they do different jobs.

But having people who understand what they are doing is not a bad place to start.

THERE has certainly been tension at the top of John Lewis, and the new chair, Dame Sharon White who starts tomorrow, has a mammoth task on her hands. I know her and she is terrific, but she needs to get a cluster of top retailers around her if that great national institution is to be brought back to health.

First, she has to fix the online operation. It is clunky, with poor customer experience. It ought to be as slick as Amazon and as customer-friendly as its stores.

Second, she has to trim the property portfolio. There probably have to be some closures, which will not be nice but may be essential.

Third, she has to rethink how the partnership should reconnect with its inherently loyal customer base. More appropriate advertising? A better link between the online service and the stores? Create a John Lewis club that is as slick as Amazon Prime?

Just about all of us want the Partnership to succeed and that is a great base to work from. But we need a bit of TLC to keep us on board.

A Chancellor who knows global finance backwards