The City needs an ambassador to bang the drum post-Brexit

One of the more novel ideas to have surfaced in the City of London is whether our financial capital should have its own ambassador, someone to champion the Square Mile post-Brexit both domestically and internationally.   

It’s an idea which was first mooted by Sir Simon Fraser, the former diplomat who now runs Flint Global, in a report he wrote five years ago on how to improve the workings of the City of London Corporation. Alongside Fraser’s recommendation that the Corporation should focus more on trade promotion, he suggested creating a new ambassadorial position to bolster the Lord Mayor’s own role in boosting the City. 

This was just months before the Brexit vote, and Fraser’s suggestion was to appoint a senior figure to help the City find a better way to connect more closely with the EU, and to build stronger relationships and understanding. 

As so often with such blue-sky thinking, Fraser’s report was palmed off to one of the City’s trade organisations to look at, where after much quibbling over who was to pay for such a role, and how the person would be elected, it disappeared into thin air. And then, of course, the Brexit camp won, and the report has been gathering dust ever since.

Until now. With the City still deeply divided over Brexit – and how best to pursue the new opportunities – Fraser’s idea is back in fashion and being discussed openly by bankers and traders. The view is that appointing such an ambassadorial figure could be a brilliant way of healing the scars left behind in the City over the Brexit divide which still run deep, and help with trade deals and negotiations not only with the EU but elsewhere overseas.

Healing those scars is a top priority. While on the surface Brexit is settled, some of the industry’s most influential figures fear the bitterness over Brexit is still festering away in the background to such an extent that there is now something of a power vacuum at the top of the City. They want a shiny new figurehead, someone who can go out and represent British finance and pull together all the different trade groups and factions, particularly now that the pandemic has shut down – temporarily one hopes – the big, swanky City dinners where so much networking and business is done. 

It’s sad to say but the legacy of the City’s Brexit battle – which saw some pretty nasty Project Fear style campaigning in the run-up to the referendum – appears to be living on with a ferocity reminiscent of Britain’s civil war between the Roundheads and the Cavaliers.  

Bizarrely, for such an international and open financial centre, London was the scene for what was at times a horribly divisive Brexit debate, as vicious as anything seen in Westminster. Backed by the big US banks and hedge funds, the Remainer Roundheads were unrepentant in their Project Fear doomsday forecasts that up to 200,000 jobs would be lost if we left the EU and that Europe’s rival financial centres would knock the Square Mile for six. Many of those rare creatures who did flag their support for Brexit were black-listed – literally put on a list –  and we know that many employees were banned by their employers from  giving personal views. Some were sat down and warned they might lose their jobs.  

Yet while they lost badly, some Roundheads still don’t want to give up.  Several people I’ve spoken to recently who supported Brexit and are now urging the City to take more robust steps to capitalise on the new opportunities, are being pestered over their views. Some have been told that unless they stay quiet, they will be threatened with being branded a “politically exposed person.”

Luckily, they are the exception. Most of the more grounded Roundheads and Cavaliers are coming together and share an equal concern that the rancour and bitterness of the last few years has to stop. They also fear that these divisions have led to a lack of leadership at the City’s trade bodies such as TheCityUK and UKFinance, which, having been so stalwartly against leaving the EU, have been left paralysed. 

Even the City of London Corporation, the City’s ultimate governing body and through the Lord Mayor one of its most influential power bases, is being privately criticised for not sticking up enough for the Square Mile in negotiations with the EU or the biggest fight of all, the on-going battle for euro clearing.

By contrast, the City’s leading authorities and institutions such as the Bank of England, the Financial Conduct Authority and the London Stock Exchange Group which were perhaps more partisan than they should have been lobbying for Remain, have swung quickly to lobby for the City. Indeed, the Bank of England’s Andrew Bailey has turned out to be a bruiser when it comes to relations with the EU, particularly in the spat with the EU and the ECB over clearing, and is in constant touch with the LSE’s LCH group, Europe’s biggest clearing house. 

Having decided to make the most of the decision, the BofE and the FCA are taking the rule-maker not rule-taker route, and it’s been a refreshing view rather than the Bank’s earlier doomsday scenarios. And all credit due to the authorities for the latest reports from Lord Hill on listing  and the Kalifa Review on FinTech.

Yet the paradox of these past Brexit squabbles is that the City is doing rather nicely. Apart from some equities trading which has moved to Amsterdam (but nowhere near as much as the media headlines would suggest), London has emerged largely unscathed from leaving the EU’s single market. 

Around 7,000 jobs have been moved out to other European capitals while a $1 trillion of assets have been transferred which, while it sounds enormous, is a tiny slice of the total. 

In the latest EY survey on UK Attractiveness for Financial Services, the UK continues to be Europe’s main destination for international investment, attracting 56 projects in 2020. This was 43 projects lower than in 2019 and the gap with the second largest recipient of investment – now France – has narrowed

However, EY’s survey suggests the UK is expected to continue outperforming the rest of Europe in attracting financial services investment. It came out in the survey as the European country with the most investment friendly COVID-19 recovery plans  -backed by 48% of respondents – and the most attractive for financial services investment.

Germany came second,  while France and Switzerland took joint third place. 

More optimistically, half of global investors say they plan to open or extend operations in the UK over the next year, up from 10 % last September and 45% up on last April. 

So who are these foolish investors who were supposed to up sticks and flee the UK in a post-Brexit world ?  Well, the US was once again the main source of investment, accounting for over a third of all UK foreign direct investment – and up on the previous year despite the pandemic. 

The next biggest investors were Australian, German and Hong Kong firms and according to the latest indicators, the City’s financial services industry will continue to be more attractive than other European capitals because London’s capital markets are still more liquid and deeper than Paris or Frankfurt. 

It’s one of those basic facts that London is Europe’s capital market and will stay so for many years to come, unless something dramatic takes place. 

Yet there is no room for complacency. Over time, the EU’s capitals will win more business and will doubtless force their domestic banks and investors to bring derivatives and euro-clearing onshore once they have built the infrastructure.

Time, then, to dust off Sir Simon Fraser’s report and take another look? Why not, it’s always better to get going when the going is good. And there are plenty of great people who would do the job brilliantly: Simon Lewis, who has recently left AFME,  Dr Kay Swinburne, former Tory MEP, and now vice chair of KPMG’s financial services, Michael Cole-Fontayn, chairman for the Chartered Institute for Securities & Investment and AFME chair come to mind. Maybe Fraser himself could be persuaded?