How to profit from Brexit: the boldness of ambition doesn’t have to be sacrificed at the altar of caution, says Alex Brummer
- Tory administration’s response to piecemeal and sclerotic opportunities
- Brexit foes seize on potential 4% GDP loss like it’s the holy grail
- Slow passage of the Financial Services and Markets Bill is detrimental to prosperity
- As the UK hesitates, Brussels is gearing up to challenge the city’s leadership
The uncomfortable reality for those who support Brexit is that the Tory administration’s response to Opportunities has been piecemeal and sclerotic.
There are good excuses for delays and sloppy talk. No one could have predicted the double whammy of the pandemic and Russia’s war on Ukraine and its impact on energy markets. But much has been made of Tory schisms over Partygate, the leadership battle and the disastrous Liz Truss interlude, which exposed the UK’s weaknesses.
All this has allowed the narrative of despair to take hold. The enemies of Brexit seized on the Office of Budget Responsibility’s projection of a possible four per cent loss of national output as if it were the Holy Grail. It is rarely acknowledged that it is a forecast and the OBR is not infallible.
Forward thinking: getting the job done is the best way to meet the challenges of Brexit
This does not stop critics such as the New York Times from stating that ‘Brexit begets Breguet’. Bregret is not Brexit, but a failure to seize the moment. One of the key benefits of Brexit was the avoidance of financial regulation from Brussels and the opportunity created to strengthen Britain’s historic role as a financial centre.
The slow passage of the Financial Services and Markets Bill has been detrimental to prosperity. As the UK hesitates, Brussels is gearing up to challenge the city’s leadership in derivatives trading in a bid to grab a share of the £97 trillion market. Instead of using London clearing, it wants European traders to use European-based facilities. Meanwhile, critics of Brexit take the view that the Paris Bourse is worth more than the London Stock Exchange.
Maybe, but methodology is challenged, there is little attention paid to global stocks listed in London and little talk about the LSE’s emergence as a world-class data and trading power house.
The best way to meet the challenges of Brexit is to get the job done. Rishi Sunak’s desire to sort out Northern Ireland protocol could usher in a more cooperative era for UKEU relations. Among other things this could free up access to the EU’s £81 billion Horizon Fund for science projects.
On the financial front the agreement between the bank and HM Treasury on Solvency II, added at the last minute to Jeremy Hunt’s budget, could be a game changer if adopted properly.
Up to £100 billion of capital is to be released from the insurance industry over the next few years. Aviva alone should have £25bn to invest in infrastructure, life sciences and other growth sectors.
Projects with reliable cash flows that can be matched with long-term liabilities will obviously be needed.
From renewable energy to new nuclear, rail and road plans, there is no dearth of such potential investments.
University infrastructure, from student housing to the construction phase of research centres, can also be unfettered.
Renewing Britain and stimulating the financial sector will require political will and the Bank and HM Treasury working together. The city is moving quickly to embrace new businesses such as renminbi deals, green bonds and fintech. JP Morgan has chosen the UK as the launch pad for its digitally enabled retail bank Chase. The UK’s freedom from harsh EU regulations presents a great opportunity.
As we saw with Truss’s development agenda, breaking down fences is never a good idea. But the courage of ambition is not to be sacrificed at the altar of caution.