The City of London’s most senior official has told the government it must move fast with its Brexit negotiations or risk an exodus of jobs and damage to the UK’s financial sector.
Before Theresa May’s much-anticipated Brexit speech in Florence on Friday, Catherine McGuinness said posturing over the so-called divorce bill was delaying negotiations over the much-needed transition deal that would prevent the financial sector facing a “cliff-edge” in March 2019, when the UK will leave the EU. A quick deal, she said, might be better than a perfect deal.
McGuinness, who chairs the policy and resources committee at the City of London Corporation – the local authority for the heart of the capital’s financial district – warned that this was a critical moment if major insurers, banks and fund managers were to avoid implementing their Brexit contingency plans.
She said: “We have to have progress … We’re talking about jobs and the economy and ordinary people.”
The corporation is keeping a tally of official announcements from City firms about their contingency arrangements. It currently puts 9,770 roles at risk, with Frankfurt receiving more business than any other EU financial centre.
Before the speech, it has been reported that the UK will offer €20bn to fill the hole in the budget of the remaining 27 members.
“They need to get on and agree, and in considering what they need to pay, to consider the fact that if you haggle out every last penny you might get the most perfect deal in the world but find you lose more because business has gone unnecessarily and your tax-take has gone down,” she said.
The prime minister’s speech has been billed as an attempt “to update on Brexit negotiations so far” and to “underline the government’s wish for a deep and special partnership with the European Union once the UK leaves the EU”.
City firms have been instructed by the Bank of England to plan for all eventualities, including a “hard Brexit” where the UK leaves the EU without any transition arrangement. The Bank had demanded details of their plans by 14 July and firms have begun to reveal how they intend to cope. For instance, Amsterdam has been picked for expansion by Royal Bank of Scotland, Dublin by Bank of America and Barclays, and Frankfurt by Morgan Stanley.
“This is a critical moment where transition needs to be agreed and if we don’t agree transition … people will have to start making arrangements, implementing the arrangements they have been making,” McGuinness said.
Without a transition deal, McGuinness said there would an “unravelling” of the City – which others have described as eco-system of financiers, lawyers and fund managers. But, she said, EU financial centres would not be overall beneficiaries, with New York and Singapore more likely to benefit from London’s loss of business.
McGuinness said the transitional deal must maintain the current trading relationship with the EU – a sentiment reflected by the chancellor, Philip Hammond, when he told a House of Lords committee this month that the transitional deal that the government was seeking would “look a lot like the status quo”. She said the City was seeking a bespoke deal once it left the EU, rather than copying other countries’ trading arrangements with the bloc.
McGuinness also called for clarity as soon as possible about the status of EU nationals living in the UK. Recent research by the City of Londonshows that capital’s finance and insurance sectors rely on foreign workers: while 78% of jobs are held by British workers, 13% are from the EU and 9% from elsewhere.
“The simple issue [is] people ought to feel welcome in their jobs and we need clarity as soon as we can,” she said, warning that financial firms had told her EU nationals were hesitating in applying for jobs, while those here might be “feeling unwanted and unwelcomed”.
There was a need to spell out the status of people living here, she said, because “it’s just not fair”.