‘There’s a lot of megaphone diplomacy going on. You have to take it all with a pinch of salt.’
There’s no mistaking the clipped tone on the end of the line. Lord Maude, former trade minister (and the man who whipped the Cabinet Office into shape) is back from two days in Davos.
It's Friday afternoon but far from being in a party mood, he's thoroughly unimpressed by the latest spat between Brussels and the UK.
The City is in uproar over the European Union’s edict that financial services will lose its ‘passporting’ rights to trade freely in the EU following Brexit, and be left with limited access.
Lord Maude is hoping to be a voice of reason amid the noise. ‘People always bang on about how important it is that we stay in the single market but there isn’t one in financial services,’ he claims. ‘There is nothing even remotely approaching a single market in financial services.’
Lord Maude is on a mission to play down Brexit's threat to the the City. ‘People are worried about passporting but most of our big banks have already got subsidiaries in the EU,’ he says. ‘The idea of a wall being erected is for the birds. It’s not going to happen.’
Financial services has become the darling of the media spotlight. Last week, the government was under fire for failing to publish a detailed blueprint of its trade strategy for financial services following Brexit. The City has been left ‘in the dark’, claimed the FT.
On Saturday, the House of Lords EU Financial Affairs Sub-Committee published a report entitled: Brexit: The Future of Financial Regulation and Supervision. The conclusions were summed up by Baroness Faulkner, chair of the group, who said: ‘There is a risk of market fragmentation and financial instability if the UK loses access to the EU, as well as harm to customers and businesses.’
These proclamations sounds dire but Lord Maude believes the City has at least one ace up its sleeve. ‘It’s been said that London will lose access to the euro clearing market,’ he says. ‘But that’s not easy to do. There are only two places in the world where you can clear multi-currency instruments, and that’s London and New York. There isn’t anywhere in the EU.’
The UK clears an estimated £880bn a day. However, the EU may also be left (slightly) out of pocket if the practice is moved elsewhere.
‘It’s been estimated that there will be a 20bn euro annual penalty for the EU financial markets if it were required to be done in the Union,’ says Lord Maude. ‘Beyond the financial penalty, it would also create systemic risk.’
The European Commission seens unwilling to give an inch when it comes to assurances of post-Brexit trade. President Jean-Claude Juncker has already warned that the UK will not get ‘a la carte access’ to the single market when it leaves the EU.
‘This is total rubbish and the commissioner knows it,’ says Lord Maude. ‘He keeps saying that you can’t have a bespoke deal, we must have something ‘off the shelf’ but everyone knows that there is no such thing as off the shelf. Everything is bespoke. It's just nonsense.’
‘My advice is don’t believe everything you hear,’ he adds. ‘Remember that this is a public negotiation, and things aren’t always what they seem.’
This morning, the CBI published its latest Financial Services Survey, compiled in association with PwC, which found that 9 in 10 firms see Brexit as the ‘most serious threat’ to UK’s status as financial centre.
‘Optimism in parts of the sector has been falling for the last two years,’ said Rain Newton-Smith, CBI Chief Economist. ‘Firms are nearly unanimous in voicing their concern about the damaging impact of Brexit uncertainty and the need for the UK to remain a vibrant centre of fintech and innovation.’
‘London is the world's financial centre,’ says Lord Maude. ‘Brexit will undoubtedly lead to some leakage of jobs to elsewhere but don't forget that the UK is one of redeeming features of the EU's financial services market. The losses won't be huge and are likely to be sector and sub-sector specific.’
Lord Maude currently serves on the advisory board of OakNorth, the challenger bank, as well as being chairman of the advertising agency Cogent Elliott and senior adviser to Covington, the law firm.
Image credit: World Economic Forum/Flickr