What they say

Stephen Archer is a speaker with great charisma. By using illustrations and personal experiences and not being afraid to share his own point of view of the current situation and who is to blame for it, he engages the whole audience, at the same time helping us all to understand the credit crunch a little better.

— Warwick Business School


Brexit and the City of London

I consciously took a breather from blogging last year.

Looking back over the past eight months it’s interesting to reflect what I predicted correctly and incorrectly. Here comes the mea culpa:

Germany did return Merkel to power, just and May was returned to power just. I was wrong to suggest that Corbyn would be removed and it will take another general election loss for him to go.

Despite some alarming events and alarmist reaction, the North Korean problem looks like regional attention seeking rather than a long-term threat.  Added to that, I trust China to maintain stability in the region.

Trump’s continues to be wearily tolerated but like a chewing gum stain it will be while before he is removed unless Robert Mueller pulls a surprise. Trump has signed a record number of executive orders but many of the larger ones will not take effect for a very long time. Meanwhile, the business friendly conservative approach has been helping markets to record levels. I fear that there is an equity asset bubble right now; I just hope that its deflation is slow.

The overriding theme of the last year and going into this is uncertainty. The bigger stories have somewhat obscured this fact. This is not just manipulation of the narrative in the media, there is real uncertainly because there are significant changes afoot that are unpredictable. Turkey cannot currently expect to join the EU with an authoritarian regime that much is clear. However, such regimes are emerging within the EU; namely, Poland, Czech republic and Hungary. Each of these states would struggle to enter the EU today with their far right leadership, erosion of democracy and even the role of law in their institutions. These states may be followed by others. This is as big if not a bigger headache to the EU than Brexit.

Trump in America and Brexit in the UK Are NO-GO topics of conversation, emotions still run high on both.  One reason for this is understandable fear of the consequences. But I believe that Trump is a passing aberration of US democracy and Brexit should not engender. Having said that, its clear that May’s Government is at sea on Brexit (and must else besides thanks to May’s weakness and low EQ.  But like Trump, May and her cabinet is a short-term aberration. Wiser heads in the civil service and the EU will ensure that a wise deal framework is arrived at. The biggest challenge is getting the deal through British politics, which is a mess.

Let me focus on one aspect of Brexit, the city of London. It contributes 12% of our GDP. To lose much of this would be a concern. It is easily the most important financial center in the world along with New York. Zurich is the next highest in Europe at 9th (not in the EU!) and Frankfurt is 11th. London has the skills, infrastructure and culture to prevail in financial services. Though the City is the one area of greatest risk in Brexit, nearly all other trading areas contain a higher risk to the EU. It is likely that satellites of London will grow in Paris and London but it is not in the EU’s interest to be punitive towards the city. Nearly half the debt and equity raised in the EU is raised in London. Europe has £20 trillion of derivative and £60 billion of insurance liabilities in London. This is an umbilical cord that it is no one’s interest to harm.

I said a year ago that global growth would be healthy and so it is proving to be, even UK growth is better than the ‘experts’ assessed.

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