Don’t forget the bankers

Tony Ward

December 4, 2017

Tony Ward is chief executive of Home Funding 

So, some seemingly good news on the Brexit front this week.

Confidence is rising that Britain will secure a deal for its departure from the European Union.

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Investors and analysts have welcomed reports that Downing Street had tabled an improved offer during the latest Brexit ‘divorce bill’ talks under which Britain could pay up to $50 billion in liabilities over future decades.

Sterling hit a ten-week high of $1.355 on Thursday, finishing November accelerating ahead of the exchange rates of all currencies used by the G10 elite nations.

This has led to some analysts posting a more upbeat picture.

Berenberg Bank has suggested that Britain’s economy should grow faster in 2018–19 as the agreement of a Brexit divorce bill will inspire greater confidence in businesses and households.

The bank now expects a sharp pick-up in business investment as well as a more modest increase in consumer spending.

As a result, it has raised its GDP growth forecasts by 0.1% in each of the next two years, with growth rising from 1.5% this year to 1.8% in 2018 and 1.9% in 2019.

“2017 was probably the low point,” said Berenberg’s Kallum Pickering, as he cut the probability of a ‘no deal’ Brexit from 30% to 20%.

“With the chance of a soft Brexit rising, the global upturn can now begin to rub off on the UK more.

“Higher business and household confidence from the lower risk of a hard Brexit should underpin stronger gains in long-lived consumption and investment.”

A big pat on the back then for the government et al.

However, let’s not get too complacent. My view is that there is still much to iron out and the devil is always in the detail, not the big picture headline-grabbing manoeuvres.

This links to one of my biggest concerns: the treatment of our banks and financial services sector during the Brexit negotiations. They remain of huge importance to the country’s economic wellbeing. We just need to look at the data.

Financial services firms generated a record £72bn in tax in the past year.

Quite rightly, this has prompted fresh calls by the City of London Corporation for the sector to be protected during Brexit talks.

The figure was made up mainly of income tax, national insurance paid by employees and employers and contributions from corporation tax, VAT and other levies.

It is 1% up on last year and is the highest paid by the industry in the decade that the data has been collected, according to the latest report commissioned by the City of London.

Catherine McGuinness, City of London Corporation, said: “While it’s too early to gauge how the country’s tax take might suffer if firms chose to move business away from the UK, these findings highlight how vital it is to meet the urgent needs of the sector as part of negotiations.”

Ms McGuiness warned that there was a ‘critical’ need during this month for the government to secure an agreement as soon as possible with remaining members of the EU about a transition deal.

The corporation, which represents City banks and other financial institutions, believes that about 10,000 jobs are at risk.

Andrew Kail, head of financial services at PwC, who compiled the report, said the £72bn of tax ‘is 11% of the UK’s tax-take and is generated across the country’.

The financial services sector employs more than 3% of the country’s workforce and pays for 11% of total public spending, the City of London Corporation said.

Reassurances are needed now before decisions are made to relocate banking staff. This is all too important to ignore.

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