Brexit Britain's great financial question

As Anneliese Dodds, the shadow Treasury Minister, says in the November issue of Prospect, it would be a shame if Brexit led to a bonfire of financial regulation. It’s a sharp point, especially when you consider how many leading Brexiteers—Nigel Farage, Jacob Rees-Mogg, Douglas Carswell—along with the Leave campaign’s financial backers, have City backgrounds. 

It’s ironic then that, as Nicky Morgan points out, also in our November issue, Brexit could end up weakening the City and that this would be a loss for Britain. Finance feeds business which in turn keeps the wider economy going. It’s worth remembering that Britain’s banks pay about £60bn a year in tax. 

But there are wider social issues that arise from having such a super-charged financial sector in Britain. House prices have gone haywire for one thing. For those who own one, that has enabled the effortless squirrelling away of massive wealth. For those who don’t, it has intensified that sense of deep unfairness that has lingered ever since the crisis of 2008—when the banks were bailed out and the taxpayer took the burden. History will not look kindly on that arrangement.

Out in the global financial markets, where would a post-Brexit Britain fit? The three great economic blocs are: China, with a GDP of $23 trillion; the EU, $19.9 trillion; and the US, $19.4 trillion (all figures at purchasing power parity). The UK is planning to leave the second of those blocs. The Chinese system is too opaque to get too close to. Will that mean integrating into the deregulatory, Trumpian US? If so, we could all be exposed to the risk—and the economic benefits of that would be concentrated in even fewer hands than today.