London needs a new deal with its nation to secure a good Brexit for its leading industries
We cannot assume that London will always succeed. No city is too big to fail. London must constantly reassert its global status because if a city isn’t rising, it’s falling.
London has long been a world-leading financial centre and is now a magnet for the international technology sector and its startups. But, in an environment being remade by Brexit, London cannot take its role as a finance and technology hub for granted.
Crucially, this is not just a London issue. All of the UK’s major cities have important financial and technology sectors. If London’s sectors get a bad Brexit, then so do Manchester’s, Edinburgh’s and Birmingham’s.
Now this is the paramount point. London will only get a good Brexit by convincing government and the UK that it stands united with them. The M25 is not a circular Hadrian’s Wall. The government has treated suggestions of city-specific deals with aloof disdain, and any whiff of cockney exceptionalism might provoke a “regional backlash”.
Read more: The whole UK will suffer if London loses out in the Brexit aftermath
So London needs a new deal with its nation. It could begin by seeking UK and industry-wide Brexit settlements for its business sectors – ones that benefit both the whole nation and London. Perhaps it could also offer to dedicate some of its taxes to fund regional regeneration. The referendum was partly a verdict on the London versus UK wealth gap. London needs to respond to that verdict with practical measures and a plea in mitigation.
London should perhaps dedicate some of its taxes to fund regeneration in cities like Manchester (Source: Getty)
Dealing with these issues is difficult because sensible debate has largely disappeared since the referendum. Brexiteers and Remainers don’t discuss issues – they barrack each other like football fans. Rather than offering informed comment, too many newspapers fuel the shouting match like fanzines. This is not how a grown-up democracy should work. If we want to make a success of Brexit, then we must listen to each other and work together.
In that spirit, what must the UK and London do for its finance and technology industries as it leaves the European Union?
First, the government must move to reassure the technology industry. It is driven by young, highly qualified and cosmopolitan people who (whether we agree with them or not) mostly did not vote for Brexit. “Brexit is a bummer”, blares London’s Techcrunch startup conference site. Techcrunch’s ongoing survey shows their industry wants a Brexit that makes it easy for EU citizens to remain in (and be recruited into) the UK.
Read more: Stay calm: The Sword of Damocles is not hanging over UK fintech post-Brexit
Before anyone dismisses this view, remember this is a sector we hope will produce a second industrial revolution and power twenty-first century employment. If we don’t address its opinions and needs, we may be blanking our era’s Brunel.
Listen, for example, to the chief executive of MBJ (a web design company): “Brexit [brings] a risk of visa requirements for non-Brits. Our team is very international… we can’t risk having to apply for 100 visas.” So they are moving to Berlin – just one of many EU cities hungry for London’s lunch. The government and London must launch a Brexit policy response.
The tech sector is concerned about the free flow of talent (Source: Getty)
They should give startups and established technology businesses generous tax and commercial incentives. For now, these must be balanced with our EU responsibilities to avoid compromising the Brexit negotiations.
The industry’s visa worries can be addressed by a UK and industry-wide “Tech Visa”. Some organisations have suggested a London-only visa, but the government has little enthusiasm for city-specific Brexit deals. A UK Tech Visa would better match the government’s “one UK” approach to Brexit, boosting a national industry that is also key to London.
Read more: Are London-only visas a pragmatic solution or a bureaucratic nightmare?
The government should invest very heavily in broadband infrastructure to make London the world’s most connected and wired-up city. If necessary, borrow to do so. Interest rates are at historic lows and we are, after all, trying to ignite a second industrial revolution here.
London’s financial services sector is much older than London’s tech sector. It is also hugely dependent on the free movement of international talent and anxious that Brexit may bring the loss of passporting and free market access.
Senior EU politicians and officials are determined that the price of free market access will be free movement of people. For the UK, this is the Brexit negotiations’ Catch 22.
Big banks are hugely dependent on the movement of international talent (Source: Getty)
However, the government has given itself much more flexibility on this issue than at first appears.
It constantly says the referendum was a clear message to get “more control” over EU migration. But “more” can mean anything from minimal to massive. It is also possible that the EU’s free movement red line may not survive the French and German elections. In a world where Trump is now top, the UK’s capability to contribute to EU security may become a useful card. Together, these elements may unbind the free movement versus Single Market knot.
Read more: Trump’s ambiguous trade policy is a massive opportunity for Britain
As with the tech industry, the best deal for finance may be a UK industry-wide Brexit settlement, which also benefits London’s financial sector. This could include a UK-wide financial services visa, similar to my suggested Tech Visa. This “FS Visa” might include very generous and flexible terms – almost a mini-free movement settlement for the sector.
Using the sector-wide free movement FS Visa (with the other negotiating chips mentioned above) as “la carrotte”, the government could then argue for a sector-specific deal on passporting and Single Market access.
The negotiations must be orderly, transparent and build in a transitional period. This avoids “road runner risk” – a cliff edge deal suddenly appearing under the sector’s flailing feet. Jamie Dimon, the JP Morgan chief executive, has lobbied Philip Hammond directly (as has the BBA) for a long transitional period. Without it, banks and financial services businesses may be forced to plan for the worst case scenario – and nobody wants that.
So the government should approach these negotiations boldly but subtly, securing sector by sector deals for London’s and the UK’s core industries. They will need to be as innocent as doves and wise as serpents to satisfy the Brexiteer and Remainer “headbangers”. The rest of us can help by recognising that slogans are not solutions. Only a sensible debate will secure the balanced Brexit Britain and London needs.