Jim Armitage: A misguided referendum which will cost London dearComments Off on Jim Armitage: A misguided referendum which will cost London dear
Oh England, what have you done?
Usually, you can shrug off the markets’ excessive reactions to political events.
The hyperactive pound, the schizophrenic FTSE, always stampede on Day One before settling down later. But this time it might be different. Quitting the EU will deliver the biggest shock to the British economy since the financial crisis. The ramifications could be felt for decades.
Anyone who says they know what will be the long-term outcome is lying.
What’s for sure, though, is that in the short and medium term, Britain will attract less foreign investment, will produce fewer goods and services, and possibly plunge back into a recession. Even the less bearish economists have downgraded their 2017 GDP forecasts by £20 billion or so.
Uncertainty kills investment, which in turn poisons the well of jobs and prosperity. Now, we have more uncertainty than at any time in living memory, even with the Prime Minister’s efforts to pave an orderly path to our exit talks.
The whole of the UK will be damaged, of course, but London — the country’s powerhouse — stands to lose the most, a truth that’s all the more bitter given our city’s overwhelming vote to Remain.
Again, it’s not yet clear how many jobs will go, but they will surely number in the tens of thousands at the least. International investment banks, like brokers, lawyers and accountants, follow their clients. If the clients decide they no longer want London to be their European hub, they will leave.
Along with that likely plunge back into recession will come a sharp rise in interest payments on our towering debts as we lose our AAA credit rating. Expect higher taxes or cuts to public services to make up the shortfall.
And all that’s before you factor in the prospect of Europe fracturing without us. Italy, Portugal and Spain’s markets crashed 9% amid fears the whole EU project is finished. Yet more uncertainty.
It’s easy to despair, and there was unmistakable, deep sadness in the voices of many bosses we spoke to this morning. But they were united in declaring that Britain, and London, must now work tirelessly to promote the benefits of trading here even without the huge benefits of our dominant role in Europe.
London still has the world’s biggest concentration of expertise in global finance. It still enjoys the centuries-old ties with the US, the English language and historic trading ties across the world.
Alongside all the negotiations with the EU to come, the new prime minister must work relentlessly with business to keep selling those benefits to the world, and persuade them that they outweigh the result of this spectacularly misguided referendum.
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