Financiers in the financial district of London would rather the UK crash out of the EU without an exit deal, even if it harms their own interests, than have Labour party leader Jeremy Corbyn take over as prime minister.
A recent poll has revealed the financial district’s (known as the ‘City’) heightened fears about the rise of a left-wing Labour government and exposed the dilemma facing financial services over which political party to back in a snap election.
The poll found the ‘City’ is overwhelmingly opposed to leaving the EU without an exit deal — an outcome that is much more likely under the present Conservative government than Labour — but still cannot stomach the idea of Corbyn taking office.
Huge political upheaval over the past few weeks and months has forced the financial services sector to consider what many see as two unpalatable options: a no-deal Brexit, which is a strong possibility under prime minister Boris Johnson; or a snap election that could enable Corbyn, who is opposed to crashing out without a deal, to come to power.
A veteran ‘City’ commentator, David Buik, said: “I would prefer a no-deal Brexit to a Jeremy Corbyn government. We will recover from a no-deal, but it will take 25 years to recover from a profligate and spiteful Labour government.”
The chief executive of a London-based asset manager added: “There’s not much in it but I would take a no-deal Brexit over Corbyn, just.” The poll of 247 workers in the financial district showed more than 90 per cent would prefer to leave the EU with a deal. However, when presented with a choice between a no-deal Brexit or a Corbyn-led government, 54 per cent opted for the crash-out scenario.
The fact that 46 per cent chose Corbyn has surprised many commentators and points to sections of the City warming to the idea of a left-wing government in the face of a hard Brexit.
A portfolio manager, Leigh Himsworth, at Fidelity International, the UK asset manager, said: “A Corbyn or more left-wing government may not be as bad as people foresee. The reliance on monetary policy we’ve had for the past ten years has not had the desired effect. It has not created inflation and we are still lumbered with massive amounts of debt. We’ve reached a point where arguably a massive stimulus is needed and the Labour Party has traditionally been the party to provide that.”
The advertising veteran, Sir Martin Sorrell, said: “It’s a choice between the devil and the deep blue sea. But we’ve had left-wing governments before and survived them. There’s no reason we won’t be able to survive them again.” Head of Brexit research at Deutsche Bank, Oliver Harvey, said: “Some market participants have expressed concerns that the election of Labour leader Corbyn as prime minister could be negative for UK asset prices, particularly sterling. We believe that these fears may be overstated.
“First, any market-unfriendly policies instigated during a Labour government are temporary, and must be set against the permanent shock caused by a no-deal Brexit. Second, we see the magnitude of economic damage caused by a no-deal Brexit as much higher than policies proposed in the last Labour manifesto.”
Chief investment officer at UBS Global Wealth Management, Mark Haefele, said: “The main threat to sterling’s recovery is if Johnson’s Conservative Party were to win with a majority in an early election. They could then overturn the legislation requiring them to ask for an extension, increasing the threat of leaving without a deal.”
But without mentioning any concerns about a Labour government, the former chief executive of the Financial Conduct Authority, Martin Wheatley, said: “A no-deal Brexit has always been the worst possible outcome.” Meanwhile, on a separate matter to Brexit, the latest triennial study from the Bank of International Settlements (BIS), shows the UK overtook the US and recorded the highest average daily turnover in interest rate derivatives in the world, seeing 50 per cent of the global total.
London has traditionally dominated the foreign exchange and rate derivatives markets due to its convenient time zone and the English language, among other factors. There had been fears that Brexit could affect its status. The new figures are “a clear vote of confidence in the City,” said Catherine McGuinness, policy chair at the City of London Corporation. “Despite challenging times, the fundamentals of the City remain strong.”
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)
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