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BREXIT: FOG IN THE CHANNEL, CONTINENT CUT OFF

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Just as our event in the splendid surroundings of the Wiener Privat Bank got under way, fog in the channel, and perhaps also in the Irish sea, began to lift.

After our President and Privat Bank Board Member, Eduard Berger, had set the scene, we did listen carefully while Jeffrey Taylor (JT), Head of European Equities at INVESCO PERPETUAL, explained the implications of Brexit for “Finanzplatz London.” But we also cast surreptitious glances at smartphone reports of the Brexit “deal” that is now being considered by the Cabinet in London, and Ambassadors of the EU27 in Brussels.

Speaking personally, JT, whose close connections with Austria began during a year as an English language assistant teacher in Linz, while reading modern languages at Oxford University, argued that Brexit was an intentional act of self-harm, damaging the economy, and dividing society, even families. Low unemployment was misleading. It reflected low productivity. Investment was falling. For two years there had been an un British Conservative party civil war. The Labour party was all over the place, while Ireland’s history had come back to haunt us. Business and commerce had been left in the lurch by politicians.

The UK attracted foreign direct investment as a springboard to the EU. There would be less after Brexit. UK manufacturing industry relied on closely integrated European supply chains. Firms in countries such as Austria, Germany, the Netherlands, and (Northern) Italy, had no difficulty in exporting to countries such as China, from within the EU’s Single Market. Why should the UK?

Under all conceivable circumstances, London would continue to be a major financial centre, in view of its infrastructure and accumulation of expertise. However, jobs were being lost. Financial centres within the EU and beyond (Hong Kong, New York, Singapore) would gain. Companies such as J P Morgan and Goldman Sachs were redeploying staff to build up competence centres within the EU. Recognition of UK regulations as equivalent to the EU’s would not provide for the same ease of doing business as the EU’s four freedoms. Equivalence could be withdrawn or lost at any time. Hitherto the crucial problem had been that companies did not know where they would stand after Brexit. Perhaps that would change now.

In discussion, politics took pride of place over finance and economics. JT was careful to avoid providing financial advice beyond predicting volatility in the GBP/Euro exchange rate. Discussion continued, lubricated by Heidi’s Exquisit Catering.


Colin Munro

 

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