11 November 2015
London’s top financiers and executives warn that a British vote to leave the European Union will have dire consequences: economic chaos, diminished trade opportunities and a decline in the City of London’s role as a premier hub for global business and finance.
Investor Richard Tice says they don’t speak for him.
“The biggest risk is staying in something that, frankly, is flat-lining and not helping its citizens,” Tice, chief executive officer of property-investment firm Quidnet Capital Partners, said over an early-morning cappuccino across from his office in London’s gilded Mayfair district.
A slim 51-year-old from England’s industrial Midlands whose firm manages about 500 million pounds ($756 million) worth of real estate, Tice is backing a campaign in favor of exit. A two-year stint in Paris in the 1990s convinced him Britain and continental Europe have fundamentally different cultures — and that his country has nothing to lose from going its own way.
Tice is among a small group of prominent financial-sector figures publicly backing a U.K. departure from the EU. Others say they’ll endorse leaving if Prime Minister David Cameron doesn’t negotiate fundamental changes to the U.K’s relationship with the rest of Europe — more fundamental than those Cameron favors.
Cameron Tuesday laid out his demands, which include changes to welfare rules for immigrants, cutting the regulatory burden on business and giving the U.K. an opt-out from the EU’s official goal to be an “ever-closer union.” Nonetheless, the premier said he believes staying in a reformed EU “will be unambiguously in our national interest.” The EU Commission immediately criticized his proposals on migrants.
That Britain should leave the EU is very much a minority view in the boardroom, especially at big companies. An April-May poll of 1,259 members of the Institute of Directors business group found that two-thirds agreed that the benefits of membership outweighed the negatives. Among large companies only, 71 percent were positive.
Nonetheless, the divisions show Cameron can’t count on unanimous support from the business community in his push to win voter endorsement of the reforms he’s seeking. He and Chancellor George Osborne say they will campaign for an “in” vote if they can negotiate devolving power to London from Brussels.
“Cameron must be worried that he has this group of very, very well-funded opponents,” said Richard Whitman, a professor of politics at the University of Kent. “Not only do they have pockets that are quite difficult to get to the bottom of, but also because they’re very driven.”
Wealthy or not, exit backers are swimming against a tide of business leaders urging the country to stay in, including top executives such as Stuart Rose, the former chairman of Marks & Spencer Plc, and BAE Systems Plc chairman Roger Carr. Many global financial institutions, including Citigroup Inc. and Germany’s Deutsche Bank AG, also have indicated support for continued British membership.
Those willing to contemplate an exit, by contrast, tend to work at smaller, less internationally-oriented firms. They argue their views are more representative of public opinion, and of the bulk of the British economy.
Howard Shore, executive chairman of broker and asset manager Shore Capital, says departure could allow the U.K. to rebuild what he sees as the freewheeling, entrepreneurial atmosphere of the 1980s, when then-Prime Minister Margaret Thatcher was deregulating financial services. With about 150 employees and 800 million pounds under management, his company is by no means tiny, but it’s still small enough to feel the pinch of time-consuming regulations, said Shore, 55.
To bolster his point, Shore this year funded a survey of 601 leaders of small and medium-sized firms that found 41 percent say the EU hinders their business. Significant majorities were in favor of large-scale repatriations of powers from Brussels. About 40 percent also supported transforming the EU into a “less integrated free trade area” — which would almost certainly be unacceptable to France and Germany — and another 14 percent favored an exit altogether.
Shore has company in Crispin Odey. The Harrow- and Oxford-educated hedge fund manager, a longtime Conservative Party donor, says the question is if “we want to be part of a Europe that keeps mangling us.” He says he also favors transforming the wide-ranging EU into a much narrower trade pact, bringing power over political matters back to London. Like Shore, Odey, whose Odey Asset Management manages over $11 billion, misses what was, in his telling, a golden period of light financial regulation and attendant success.
It’s not yet clear how long Odey’s fellow citizens will have to consider the pros and cons of staying in. Cameron has promised a referendum by the end of 2017, though some business groups have called for it to be held as early as possible to reduce the period of pre-vote uncertainty.
In the meantime, both sides are organizing. The pro-EU camp is coalescing behind a group dubbed Britain Stronger in Europe, while those favoring departure are backing two separate groups: Vote Leave and Leave.EU. Business for Britain, a lobby group that supports Vote Leave, counts a passel of prominent City figures among its advisers, including Numis Securities CEO Oliver Hemsley and Roger Bootle, the founder of consulting firm Capital Economics.
Even on the “in” side, there’s strong support for tweaking Britain’s relationship with the EU. Among both Britons and other Europeans, “there is collective recognition Europe needs to be more flexible, more competitive, more fleet of foot,” said Carr, the BAE Systems chairman, citing slow-moving EU efforts to lower trade barriers for services and build the region’s digital economy.
Britain would face significant uncertainties were it to vote to leave a body that’s shaped much of its economic and political landscape for 40 years. Millions of European citizens who now live visa-free in the U.K. would have to be integrated into a new immigration system, and a comprehensive trade deal would have to be struck with the EU’s 27 other members. Perhaps most importantly, foreign investors would need to be convinced that the U.K. and London, the urban dynamo at the heart of its economy, would remain as attractive if they were outside the world’s largest economic bloc.
“London didn’t just appear by magic. It’s part of that big international capital market with 500 million rich consumers,” said Alan Houmann, the head of government affairs for Europe, the Middle East and Africa at Citigroup in London. “We invest here for a good reason and we’re very in favor of what we have.”
Tice, for his part, says the transition can be pulled off without upending the economy. The former head of CLS Holdings Plc, a major property-investment firm, calls leaving a “very simple process” in which the EU would negotiate a new accord with a separate Britain in one to two years. “I don’t think there’d be any disruption at all,” he said. “This is not cataclysmic.”
He’s doing his best to make departure a reality. He’s co-chair of Leave.EU and says he has given the organization substantial financial support. But he’s given up on finding allies at big banks to back his crusade. “We’ve tried,” he says. “They just can’t go there.”