Could France steal the UK's competitive advantage?

Diary: RBS chairman Howard Davies talks gilet jaunes, the Parliamentary Tiggers and why the corporate governance code could be a death sentence for British boardrooms.

by Howard Davies
Last Updated: 04 Apr 2019

Popping backwards and forwards to Paris to teach, as I do, gives one a different perspective on Brexit. The French have said officially that they regret our decision, and at some strategic level in their foreign office perhaps they do. But there is a sense that they have cried crocodile tears while seeking competitive advantage, just as we would do were the botte to be on the other pied.

They were irritated by Boris Johnson as foreign secretary, who made "jokes" at their expense. And Cameron’s boastful claim that he would roll out the red carpet for French tax exiles fell flat. So we should not have been surprised when the mayor of Paris rolled out the red, white and blue carpet for any bankers fleeing Brexit Britain.

For a while, the narrative was all going their way, with a young and charismatic president cutting taxes and regulation. HSBC and Bank of America announced cross-Channel staff moves, and with the help of the toss of a coin to resolve a tied vote, the French secured the HQ of the European Banking Authority, which is obliged to leave London as soon as we do. The story that there was a bust of Marianne on both coin sides is surely a canard.

But then in November that French ability to snatch defeat from the jaws of victory came to the fore. Red, white and blue were replaced by yellow. Riots every Saturday, extensively covered on live TV, with a few burning cars for added colour, spoilt the mood. Then the revolting unions took a hand, using Brexit as an excuse to demand more customs officers at Calais and the Gare du Nord, and engaging in a disruptive work to rule. In France a work to rule is curiously worded as a "withdrawal of zeal". Zeal is not a word one would associate with a douanier, but if they had it before they certainly don’t now.

So is the Paris campaign to take over as the Eurozone’s key capital market doomed? I am not so sure. The French are set fair to take the leading role in financial regulation, and will look for ways to promote relocation of activity to the continent. What does the market think of their chances? One key measure to watch is house prices. Over the last 20 years Paris prices have gone up 3.9 times against 3.6 for London. Over the last year Paris flats are up 6 per cent while prices in almost all central London boroughs (the best comparator) are down, by over 20 per cent in Kensington and Westminster, in spite of a weak pound. So as long as you leave your yellow waistcoat in your car boot, Paris still looks a good bet.

In France they love changing the names of their political parties. They have been at it again recently. The National Front is dead, Vive the National Gathering. Macron’s Party, the Republicans On the Move, is new, and the Socialists now barely exist, supplanted by France Insoumise, roughly translated as Rebellious France. We, by contrast, have been stuck with Labour and Conservative for a century, with occasional reshuffles of words like liberal, social and democratic in the centre.

Now that might change. Corporate affairs departments all over SW1 are wondering about how to approach Tom Watson’s Labour schismatics or the crowd around Chuka Umunna who have dubbed themselves The Independent Group. It took no more than a moment to dub them the Tiggers, which captures the bouncy enthusiasm of Anna Soubry and her ilk well. Temperamentally, though, I would feel more at home with the Eeyore party. As one surveys the wreckage of our Parliament his catchphrases seem appropriate. "Days, weeks, months, who knows?" And then "most likely lose it again anyway". That’s the spirit we all need in these difficult times.

You don’t have to be far into a City dinner these days before someone will suggest that the entire House of Commons should be swept away, sent for re-education in the countryside and replaced by a new lot of competent, right-thinking people with experience of running something. These insightful commentators probably know in their hearts that it is an unrealistic thought.

But the Financial Reporting Council, even though it is itself under sentence of death, has got close to doing the same thing to British boardrooms. The new corporate governance code, which dates the beginning of a chairman’s board service to the point at which he or she joins the board, not the date of taking up the position, will remove close to a third of FTSE 100 chairs in the next 18 months. It is not at all uncommon for a chair to spend two or three years on the board before taking over and, if all goes well, another eight or nine years’ service would normally follow.

We shan’t know for a long time, if ever, if this enthusiasm for turnover is positive or negative for company performance. There will be disruption and congestion. Chair roles are not so sought-after these days, especially in financial services. The new Senior Managers Regime, which attaches particular regulatory responsibilities to named individuals, gives some candidates pause. One thing is certain though: it is going to be good business for headhunters. An ill wind, as they say. What a pity one cannot buy the stock of a pure-play London search consultancy to exploit this opportunity.


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