Will Brexit butcher the banks?

The financial crisis defines our age. It helps explain everything from the presidential nomination of Donald Trump to Jeremy Corbyn’s leadership of the Labour party after 30 years on the political fringe. Certainly, the Brexit vote wouldn’t have happened without it. The crash of 2008 created a sense of unfairness that is still roiling our politics, as well as calling into question the competence of the West’s ruling class.

The soi disant ‘experts’ were easily dismissed during the EU referendum campaign because nearly all of them had got the economic crisis so wrong. The Brexiteers asked: why should the public listen to the arguments of organisations and businesses that had made such disastrous misjudgments? The same thing is happening now when possible Brexit settlements are discussed. It is easy to undermine the economists who warn of financial disaster by simply citing their forecasting records. Of course, this does not mean that the latest predictions are wrong. But it does make it harder to persuade voters to take notice of them. Another factor that counts against them is that the fall in the pound — since Theresa May announced she would invoke Article 50 by the end of March — has pushed the FTSE 100 up to a record daytime high.

One irony of the impending Brexit negotiations is that Britain’s most important industry is its least popular one: financial services. As a banker lamented to me this week, this isn’t the case in Germany, where manufacturing industry is a source of national pride. This creates a particular issue, because few politicians would want to argue publicly for compromises on, say, controls over immigration for the sake of bankers’ access to EU markets.