City dealing with ‘massive uncertainty’
THE UK’s Brexit negotiations have caused “massive amounts of uncertainty” in the City, the Tory chairman of the Treasury Committee has warned.
Nicky Morgan spoke of her concerns that Britain’s departure from the EU trading bloc would cause a gradual chilling effect on investment decisions over the next decade and beyond.
Mrs Morgan appealed to Theresa May to “keep talking” to break the deadlocked negotiations, adding “time is short and businesses need certainty”.
The former cabinet minister said: “Massive amounts of uncertainty, obviously larger organisations who are able to have armies of lawyers and consultants are preparing for the worst-case scenario.
“Obviously lots of different banking licences are being applied for overseas.
“Some jobs are being moved, but my fear about this has always been it’s not necessarily the investment decisions now or the setting up of new businesses, it’s what happens in the next 10 to 15 years.
“The HQ in New York that’s thinking about the next big investment in the business actually thinks, well, we won’t to do it in London this time, we’ll do it somewhere else in mainland Europe because we know that’s safe and we know what the environment is going to be.”
“I think the other things that people are talking about is obviously the preparations they are having to do and working with smaller businesses they work with, actually how prepared and ready they are to weather what could be a very bumpy few months.”
The MP for Loughborough argued any deal needed to be “based on a recognisable model to provide the best chance of agreement” as she underlined an appetite within the services sector for close alignment.
She said: “Obviously I have lots of conversations with city audiences, particularly around financial services regulations, and the honest truth is that many of them do not want divergence from EU rules, so whatever we end up with and we know that the equivalence regime is going to have to take a huge amount of strain given the way that our financial services industry is currently integrated with the EU, so we’re going to end up effectively following the EU rules for some time to come anyway.”
Mrs Morgan expressed her own “regret” over the outcome of the 2016 EU referendum and the way in which the negotiations had been handled by the Government.
She said: “Whatever relationship we end up with is less good than the one we have now.
“So there will be damage to our economy and obviously the Treasury Select Committee is engaged in making sure that those analyses are going to be published by the Government, the Bank of England and others, and we’re asking them for that.
“I still bitterly regret that we’re in this position. I wish the Remain campaign had been different, I wish we had been successful, I wish we’d made our arguments better, but I think Euroscepticism should not be a surprise to any of us who’ve been involved in politics for the past few decades.”
Her committee, she added, had made it clear that it wanted the impact assessments “as soon as possible, both so we can put them before MPs before they vote, but also so we can take evidence from them and we would expect the Chancellor and the Governor of the Bank of England and really anyone else we wanted to summon, to come and give us their views.
“But of course much of this depends on what the Prime Minister comes back with, what the scenarios are and the time that’s available.”
Brexit, she said, would bring with it change and uncertainty, but could bring some opportunities.
She said: “I suppose with anything though the UK is an entrepreneurial country and the City of London has been through worse and if you’re going to look for silver linings then there will be opportunities to perhaps take advantage of new technologies and new industries and sectors in ways that are right for the UK, but it’s going to take some time for that to become clear.”