Brexit deadlock causing uncertainty in financial services industry

Yet again the business industry is reporting an uncertain future post Brexit.

A report published by the CBI and PwC has found that growth in the UK financial services has stagnated and, they say, this is directly related to the uncertainty over Brexit.

Furthermore, growth in other areas such as investment management and general insurance grew at what the report termed a “tepid” rate.

The other attributable factor is the slow rise in wages, which it is stated is holding back the economy.

However, the head of financial services for PwC stated that Brexit is driving uncertainty within the financial services industry.

The survey also revealed the level of concern within the sector surrounding Brexit and the specific concern within the banking sector. There is a level of apprehension in the banks’ ability to implement plans in time for Brexit; in fact a third of banks said they were “not so confident” of implementing Brexit plans by March.

Further concerns revealed that many companies are worried about the status of cross border contracts.

While the Bank of England (BoE) has put in place billions of pounds in cross border derivatives contracts to avoid market disruption, the BoE is still awaiting confirmation from the EU that it will reciprocate this plan.

Calls from within the financial services industry are clear – the Government must develop a specific strategy for the financial services industry in the scenario whereby Brexit does go ahead. The industry expects the Government to find an agreement with the EU which will continue to attract investment, jobs and develops the sector generally following Brexit.

However, Brexit is far from straight forward and the Government has still not significantly progressed talks on other matters which have been before it for many months. With just a matter of weeks until an agreement is expected it doesn’t seem hopeful that the Government will have the capacity to even get close to carrying out such talks.

 

UK Government refuses to listen to frank statements of fact from Macron and CBI

Appearing on the Marr show yesterday, and delivering his interview in impeccable, fluent English the French President Emmanuel Macron repeated his warning to the UK that full access to the EU’s single market for UK financial services is not feasible after Brexit.

Macron conceded that a special relationship would be possible for Britain to secure a bespoke trade deal, but the UK must adhere to specific stipulations. He reiterated that it was “not feasible” to secure any such deal or give full access to the single market without accepting the rules.

His interview with Andrew Marr was broadcast just days after a summit at Sandhurst with Theresa May where he (again) firmly rejected the idea of a tailored Brexit deal for Britain’s financial services industry without adhering to rules.

And the requirements clearly include being subject to the jurisdiction of the European Courts, something which although Macron wasn’t specific about is implicit in what he says.

President Macron can’t have been more explicit in his words. His interview with Marr was unambiguous which came after he had said precisely the same thing at the Sandhurst Summit.

There is a degree of clarity from Macron that the UK Government is just not listening to.
Even the CBI demanded that we have full access to the single market and customs union. It’s Director General Carolyn Fairbairn said in a speech last week that a comprehensive customs union is a “practical real answer.”

She also urged the Government to formulate a rapid agreement on the shape of a new deal. “Time is running out – by March next year our country will be out of the EU,” she added.

That remains to be seen as I still firmly believe the only sensible solution is to stop Brexit all together, and since the Government is in chaos and negotiations have not in any way moved forward (how can they when the UK Government is unclear about how to form the next stage of the negotiations,) this is a perfectly feasible solution.

But whatever else it does or doesn’t do the UK Government can’t go on ignoring statements of fact given by Macron, or our own Secretary General of the CBI.

They couldn’t be more candid about the consequences of Brexit for the UK- they are simply not being listened to.

Business for Britain’s suggestions remind us of why we are pro-European

This blog post recently appeared on Labour List. Since it’s a very important issue, I am posting it again on this blog

Proposals recently put forward should remind those of us on the left of the need to fight the good fight when it comes to Europe.

A set of suggestions put to the government, previewed in the Daily Telegraph, have been compiled by the right-wing Eurosceptic lobby group Business for Britain. They are part of its effort to have certain UK companies made exempt from EU guidelines. A paper released by the organisation argued that British firms should be allowed to “opt out of some of the more onerous European regulations” in order to enhance “competitiveness”. They say doing so would save the UK £7 billion a year (a figure, incidentally, around a tenth of that which the CBI estimate that we gain each year from being in Europe).

That the man making the Business for Britain case is billionaire and former Tory Treasurer Peter Cruddas gives a sense of exactly where the group is coming from. Cruddas has joined Business for Britain’s eight man board – at present headed up by Matthew Elliott, founder of the Taxpayers’ Alliance – with the stated intention of “changing the terms of Britain’s EU membership”. His anti-EU offensive this week has centred on the apparently stifling level of “red tape” Britain is subjected to by Europe.

Presenting Euroscepticism as an attack on bureaucracy is a common – and unfortunately fairly effective – rhetorical device among those on the right. In enables protection for workers to be brushed aside as needless officialdom – vital safeguards on the financial sector to be dismissed as administrative window-dressing. It frames the debate in a way that, at first glance, is compelling to an outsider – no one wants more red tape, after all, do they? – but which in reality seeks to undermine employee rights and let businesses operate unchecked.

The supposed “red tape” currently binding EU firms includes regulations which protect workers from exploitation and discrimination, and measures which mitigate against the risks attached to international finance. There may be occasional news stories about EU guidelines missing their target or being too prescriptive, but in the great majority of cases they act as a brake on businesses looking to take shortcuts or exploit loopholes.

As we move towards the European Elections in May the debate about EU membership is likely to move in one of two directions, either becoming a more and more negative discourse about immigration, or an increasingly technical debate about whether, in financial terms, Britain gains more than it loses through being part of Europe. If we are to set out a more positive argument about the EU we need to avoid colluding in the idea that all Directives from Brussels are bad, and instead remind voters that being part of Europe is a means of protecting our social fabric.

With the likes of Peter Cruddas leading the Eurosceptic charge – and a Tory government at some point in the future unchecked by the EU seeking to further undermine employees – it is vital that the Labour Party does not just pay lip service to the European Elections. We must be sure to see the wood for the trees when it comes to the EU, and to make the case strongly.

Staying in Europe is about staying prosperous – but it’s also about who we are as a country

Based on a piece originally featured on the Huffington Post.

Earlier this week, at The People’s Pledge’s ‘Real EU debate’ in Westminster, I spoke in favour of Britain remaining in Europe. It was a lively event. Membership of the EU is an emotive issue, presented by Europhiles as a lifeline for the UK, and by Europhobes as a noose.

I believe, like countless others, that staying in Europe is the only way of securing Britain’s future prosperity. But for me these economic arguments run deeper, to the core question of what type of country we want to be.

It might be possible (if infinitely more difficult) for Britain to achieve prosperity outside the EU. But it would come at an enormous cost. To survive we would have to become more economically unfair and less globally significant – a poorer, more marginal country with narrower horizons.

The most immediate consequence of leaving Europe would be to effectively seal the fate of British manufacturing. As Nissan CEO Carlos Ghosn said last month, being part of the common market – to whom we sell around half our exports – is integral to businesses based in the UK. Outside of it we would become an “unattractive option” and companies like Nissan (which currently employs 6,500 at its Sunderland plant) would have to “reconsider” their strategy. It is likely that other firms, such as Airbus, would follow suit.

The financial sector, too, would struggle, and according to some commentators it would be difficult for The City of London to remain Europe’s business capital. Places closer to the heart of EU decision-making – such as Paris or Frankfurt – could take its place. Sir Martin Sorrell calls leaving Europe “disastrous”. He points out that Japanese investment in the UK is contingent on us staying in Europe. Trying to remain a trading centre while economically isolating ourselves would leave us permanently compromised.

In the longer term, with the EU currently working with the US to create the world’s biggest free trade area, Britain could become further marginalised. The CBI’s Director General John Cridland argues that being in Europe gives us a “springboard”, through unfettered trade agreements, with which to reach 500 million people and £15 trillion in profits. “We’d struggle to pull off deals of this scale on our own,” he says.

On top of this, the negative impact on higher education of Britain leaving Europe could be very serious. As Professor Paul White points out, this year we received 23% of EU Research Council Grants – more than any other country. Without this funding universities might have to downscale or increase fees – a move which would affect young people (the group, according to polls, who are least in favour of an EU exit) the worst. The insularity that withdrawal would bring could, White says, undermine our reputation as the second strongest higher education system in the world.

I therefore believe the notion we could leave the EU but carry on as normal is flawed. We would have to adapt. The only way I can see of doing this would be through a relaxation of tax rules and an effort to move from hub to haven. Big companies might be replaced by ‘boutique’ avoidance specialists and businesses enticed here by the chance to use the UK as a low tax trading base. The pressure on the government to reduce taxes – combined with the loss of the EU funding many of Britain’s regions receive – could create worse public services and more inequality. As David Marquand puts it, to survive Britain would have to become “a market state…a harder, more selfish and, above all, nastier society”.

So for me the Europe Question goes beyond prosperity; it relates to the deeper issue of who we are as a country. Do we want to embrace a fairer, more modern world or will we consign ourselves to narrow-minded irrelevance? I believe this is a no-brainer; as I will continue to argue all the way up to the European Elections in May, Britain needs to be confident and outward-looking enough to see the wood for the trees when it comes to Europe.

Making the business case for Europe – the UK must side with pragmatism over prejudice

Last week’s comments by Nissan CEO Carlos Ghosn expose the flaws of Euroscepticism. In terms of current government policy it is the tail that wags the dog.

Ghosn suggested Nissan’s Sunderland factory is European first and British second. He said his company would need to reconsider its “strategy and investments for the future” if Britain leaves the EU.

His words hit on an uneasy fault line within the coalition government – between economic rhetoric which promises jobs and industrial investment, and social policy which is nationalist and populist in tone. The former can only be achieved through global engagement; the latter relies on a sentimental vision of ‘Little England’. With Tory backbenchers, led by Adam Afriyie, now pushing for an early EU referendum – a demand which is, by Afriyie’s own admission, driven by the short-term political goal of warding off Ukip – the gap between the two is becoming ever wider.

Last week’s disagreement between the Confederation of British Industry (CBI) and Eurosceptic campaign group Business for Britain shows how the Europe issue comes down to a straight choice: pragmatism or prejudice.

The CBI, which represents 240,000 UK companies, describes the case for staying in Europe as “overwhelming”. It values the annual benefits of Britain’s EU membership at as much as £78 billion – £3,000 a year for every family. As CBI Director General John Cridland points out, EU membership provides a “springboard” for reaching 500 million Europeans and gives access to trade agreements worth £15 trillion. “We’d struggle to pull off deals of this scale on our own,” he says.

Cridland’s point is very clear: in the face of big global economic changes our best chance of remaining economically relevant is through working with our neighbours.

Business for Britain’s approach, by contrast, illustrates how difficult it is to make economic sense of an argument which is at its core myopic and knee-jerk. The group’s co-chair John Mills drew a blank when asked on the BBC’s Today Programme how redundancies at plants like Nissan tie in with the ‘job creation’ EU withdrawal would supposedly bring. Even Mills’ own organisation’s polling cannot disguise the fact that big businesses – those most likely to generate large-scale employment – say the benefits of being in Europe outweigh the costs. Everything about Business for Britain, from its emotive language to the sepia wistfulness of its website, emphasises nostalgia rather than logic.

The contrast between these two mindsets was summed up nicely by David Marquand last month, when he wrote that “Europhiles speak to the head, Europhobes speak to the heart”. For me these are two approaches which cannot be reconciled; yet by succumbing to backbenchers’ Euroscepticism David Cameron has tried to let them coexist. He has strapped himself to two horses which will never run in the same direction. This is not just the case in terms of business, but also on issues like security, where isolationism threatens the UK’s ability to tackle organised crime.

With senior business figures continuing to speak out in favour of Europe it is important that those on the progressive wing of politics are staunchly and unapologetically pro-European. As the business case for the EU builds the misty-eyed vision of times passed which sustains Euroscepticism (the “never never land” spoken of by John Major) will be exposed.

Regardless of when or if there is a referendum, this is an issue which cannot be thrown into the long grass. Those of us who want a more prosperous Britain must seize the impetus on Europe and ally ourselves with the forces of reason.

Tory MEPs defy Cameron on EU carbon market vote

Yesterday in a tight vote in the full session of the European Parliament in Strasbourg, most Tory MEPs chose to vote with climate sceptics , thereby going against their own government.  The cost of carbon trading permits in Europe’s emissions trading scheme (ETS) has sunk due to the economic crisis. Yesterday’s vote was intended to allow the release of fewer permits for auction in the short-term to try to get the price back up again.

By voting against this important element in both British Government and EU climate policy, Tory MEPs put their fanatical euro-scepticism ahead of British jobs and our environment. All three Conservative MEPs for London, Marina Yannakoudakis, Charles Tannock and Syed Kamall, voted with the climate change sceptics against the UK’s best interests. Amazingly, Tory MEPs ignored the strong views expressed by their own Ministers in London.

It is now confirmed that Members of the European Parliament voted 334-315 against the measure.  After the vote, the EU carbon price immediately fell 44 percent to a new record low of 2.63 euros a tonne.

My colleague Linda McAvan who leads for the Socialist and Democrat Group on climate change described the vote in the European Parliament as “a catastrophe for the environment,” adding “”The UK carbon floor price for the power sector came into force at the beginning of this month, so UK electricity providers are currently paying an extra £4.94 per tonne of carbon they emit. This is more than double the current ETS price for carbon, and it’s set to rise to five times the projected ETS price by 2015.”

 Even as former Tory Ministers who worked closely with Mrs Thatcher said publicly that she was the first head of government to recognise the science of climate change and would have warmly welcomed the free market solution offered by the EU’s emissions trading scheme (ETS), Tory MEPs blithely voted not to support the pan-European solution. It’s yet another case of the coalition setting themselves up as the ‘greenest government ever’ while their MEPs in Brussels vote against environmental measures.

Not only have the Tories snubbed their own leader, but they’ve also dismissed the views of a huge range of experts and businesses who believed this change would have been good for the environment, the consumer and industry.  Those who supported the proposal included the CBI, Shell, Philips, Tesco, Unilever, Kingfisher, Johnson & Johnson, SSE, E.ON, UKEnergy, UK Green Building Council and the UK Corporate Leaders Group.

Sadly, their efforts fell on deaf ears as the Tory MEPs sided unscientific climate change deniers in the face of reasonable arguments from all sides.

The Tories and UKIP are using the EU for party advantage

Contrary to much popular opinion put about by those with a stiletto-edged axe to grind on the European Union, the majority of businesses in Britain are in favour of EU membership. The reason is very simple: 47 per cent of our exports of to EU member states while 50 per cent of foreign direct investment is from EU countries.

Speaking to the Business for New Europe coalition tomorrow, Tony Blair, in a strong return to the domestic political scene, will point out that since major economies such as China, India, Brazil and Russia are emerging as formidable competitors in the global power game, EU membership is more important than ever. Sunday’s Observer quotes a source close to Blair as saying: “Whereas the post-war argument for Europe was about peace versus war, he [Tony] will make the point that the 21^st century case for Europe is about power versus irrelevance.”

This is, I believe, the most powerful argument for being in the EU. It is, in fact, the only realistic way Britain can remain at the top table. Added to this is the statement by CBI President Sir Roger Carr last week that UK membership of the EU is the “launch pad” for much international business. Again according to the Observer, Sir Roger said, “Whatever the popular appeal maybe of withdrawal, businessmen and politicians must keep a bridge to Europe firmly in place.”

Enter the hapless Tory MP former party whip Michael Fabricant, who now goes under the title of Conservative campaign chief and wants an electoral alliance with the manically anti-EU UK Independence Party (UKIP). In charge of the Conservatives’ marginal seats strategy, he thinks teaming up with UKIP cold win the Tories an extra 20 seats at the general election

The huge mismatch between what is good for Britain and what the Tories believe is good for their party is becoming ever more apparent. Senior Tories are clearly prepared to go down the route of seriously considering withdrawing from the European Union in order to try and maintain their domestic political advantage.

Make no mistake, UKIP not only want to come out Europe, it is their very reason for being. Some top Tories appear to be prepared to ally with a rabid anti-EU party which is not even part of the mainstream in this country to gain a few additional seats in the House of Commons. Rarely has such brazen political opportunism been so rife on the right of British politics.

UKIP, of course, has a presence in the European Parliament. That is, however, as far as they have got. They have no MPs and only a handful of local councillors. They make a lot of noise but they are nowhere in national politics. However, if the Tories were to grace them with their support, UKIP would have a way in. This could be the beginning of the end for Britain and the European Union. We would be left without the massive trading advantages the head of the CBI has emphasised, isolated and much worse off.

Meanwhile, it is not just Tony Blair from the Labour side who recognises that Britain needs the EU. Labour Leader Ed Miliband has recently made an important speech outlining the very same case. Britain staying a member of the EU is, as they say, really a no-brainer.

Ed Miliband makes it clear that Britain’s future lies within the European Union

The economic case for being in the European Union is overwhelming:

• a market of 500 million people
• producing and selling one third of the world’s goods and services
• where British businesses do at least 50 percent of their trade 

The aspirations for the British economy – high-skills, high-wages and high productivity – are easier to achieve within the European Union than outside it.

 Ed Miliband in his ground-breaking speech to the CBI used the example of the UK car industry to demonstrate that it is easier to achieve our aspirations within the EU rather than outside it.

 “Nissan, Tata and Toyota didn’t come to Britain for a low-wage, low skill economy:” Ed told his audience on Monday. “They come to Britain because we offer a gateway to high-income consumers who want high-value goods. And to make those high-value goods they invest in high-skilled jobs…………….we have people from all over Europe coming here to be part of (our) Technology Clusters. Because of the single market.”

The economic case for being in Europe is overwhelming, and many, if not the majority, of those attending the CBI conference are pro-EU and would not want Britain to leave. Their businesses rely on being in the EU. 

The alternatives for Britain were we to exit the EU are grim indeed.  Ed highlighted them: 

“If we left the EU, be under no illusions, it would be the United States, China and the European Union in the negotiating room. Literally eating our lunch. And Britain in the over flow room……I fear ……we would end up competing on low wages and low skills. A race to the bottom.”

 And most importantly, Ed Miliband stressed that this is not a future for Britain that we should contemplate. 

Yet no-one, even the most Europhile amongst us, would for even a nano-second claim that everything in the EU is rosy. Ed pointed to the following.

There are 25 million unemployed people across the EU and five million young people in the EU are at this minute looking for work. The failures of the Euro have shaken confidence in the whole EU. The EU budget often seems to match the priorities of the 1950s not the 21st century. Meanwhile the immigration attendant on enlargement has not been handled well.   

These important matters should be addressed while the massive advantages to Britain of being in the EU emphasised more strongly.

Ed is also very clear that now is not the time for a referendum on the EU. Businesses considering coming to Britain would put their investment on hold pending the outcome of a referendum. There would be instability in the British economy. Moreover, holding a referendum on the EU would not reflect the priorities of the British people – jobs, living standards and prosperity.

 Britain is stronger in the EU than it would be outside:  “Exit would not honour the traditions that have made Britain the great country it is,” was the upbeat note on which Ed concluded his speech. “Britain has always given so much to the world. We have traded with others, not turned inwards. We have opened up our country to new influences, not shrunk from them. We have engaged with others, not stood aside from them.

 “An ambitious Britain has always been an outward looking Britain. An inward looking Britain can never be an ambitious Britain.”

 And finally Ed Miliband said in no uncertain terms: “I believe our future lies within the European Union.”