Mansion House speech: Ian McConnell: UK is ‘leading through action not rhetoric’ – really Rishi Sunak?

And his declaration on this point, close to the end of his speech, followed this section: “Ambitious at home. Confident internationally. With a plan to make this country the world’s most exciting financial services hub for decades to come, creating prosperity at home and projecting our values abroad.”

The speech to senior City figures also included a reference to a “sovereign approach”. And Mr Sunak talked about “new freedoms” in the wake of Brexit.

And, piling the rhetoric high, the Chancellor spoke of “an independent path outside the European Union”.

The narrow trade deal struck late last year by the Boris Johnson administration with the EU, the world’s biggest free trade bloc, did not include the services sector.

There has been much talk from the UK side, including from Mr Sunak, about striking a post-Brexit agreement on financial services “equivalence”.

And the financial services sector has been hoping for such an arrangement to mitigate disruption in the wake of Brexit.

Of course, as big financial services players saw how things were unfolding on the Brexit front following the 2016 Leave vote, they were among the most pro-active in moving operations and jobs to continuing EU member states to minimise damage when the UK left the single market.

This proved to be a wise move. Early signals that there might be a post-Brexit agreement covering financial services faded fast over the years.

Financial services groups decided they could not wait to see what was happening on Brexit. And many would have seen which way the wind was blowing in a UK in which the Government thumped the tub loudly on EU separation and Brexiters cheered.

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However, even financial services groups hard-wired to preparing for all eventualities might have been surprised at just how long it took for it to become clear what was happening on Brexit. The Johnson Government deal was eventually unveiled on Christmas Eve, just one week ahead of the December 31 end of the transition period.

Goods exporters have rightly highlighted the huge problems this has caused for them, with the woes exacerbated still further by the fact they then had to wait for the small print, which contained so, so many practical problems, and react as best as they could to this. The lack of practical help, as opposed to rhetoric, from the UK Government was astonishing.

The UK Government’s brinkmanship fuelled in a very significant way already-huge troubles for goods exporters, with the resultant chaos plain for all to see over the months since the country exited the European single market with the end of the transition period on December 31.

It was noted in this column on December 23 that a huge UK Government advertising campaign, imploring businesses to prepare for leaving the European single market, sounded increasingly like so much satire, given the lack of any substantial basis on which to do so. It is important to note, however, that none of the Brexit shambles, all the way along, has been any laughing matter.

Of course, UK exporters in general, and those dependent on supply chains including EU countries, did do their very best to prepare for various eventualities. It is just that they had to do so with their hands tied behind their backs because of the vacuum of information from the UK Government on just what might happen next. At times, it looked as if the Johnson administration did not know itself.

And, while financial services players have taken major steps to prepare, that does not mean that Brexit has not impacted very significantly on them and the sector as a whole.

It emerged in March that more than one-quarter of UK financial services firms had by then said publicly Brexit was having a negative impact on their business, or would do so, as the transfer of assets and jobs to continuing EU member states carried on.

This ongoing fall-out from the UK’s departure from the EU was highlighted in the EY financial services Brexit tracker.

EY highlighted the fact that 43 per cent – 95 out of 222 – financial services firms had stated publicly that they had moved or planned to shift some UK operations and/or staff out of the country to elsewhere in Europe. The accountancy firm said the total number of associated job relocations since the EU referendum had risen to nearly 7,600, from 7,500 in October 2020.

Fifty-seven out of 222 UK financial services firms, 26%, had by the time of the March tracker stated publicly that Brexit was negatively impacting their business or would do so. This was up from 49 firms in January 2020, EY noted.

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EY observed at that stage that 24 of the largest financial services firms – ten banks, nine insurance providers, and five wealth and asset managers – had “so far transferred or announced an intention to transfer assets out of the UK to [elsewhere in] Europe due to Brexit”. It added: “Not all firms have publicly declared the value of the assets that could be transferred but, of those that have, EY’s financial services Brexit tracker estimates the figure to be almost £1.3 trillion, up from £1.2 trillion in October 2020.”

So the effects of Brexit on the financial services sector have, as highlighted by many, been very significant indeed in reality. They cannot and should not be obscured by the ideological fog around the folly.

Mr Sunak told Parliament on November 9 last year: “Our first task as we write this new chapter for financial services is to give certainty on our approach to regulation after we leave the transition period. One of the central mechanisms for managing our cross-border financial services activity with the EU and beyond is equivalence. I remain firmly of the view that it is in both the UK’s and EU’s interests to reach a comprehensive set of mutual decisions on equivalence. Throughout, our ambition has been to manage these co-operatively with the EU, but it is now clear that there are many areas where the EU is simply not prepared to even assess the UK, so we need to now decide on how best to proceed.”

Note the “simply not prepared to even” bit. This seems from an external perspective to be a peeved tone. And it appears to be one which chimes with some Brexiters’ idea that the UK should be able to decide unilaterally to leave the EU, do so in a vexatious and unfriendly way, and then expect the bloc to bend over backwards to ensure the country retains the benefits it had before as a member of the single market, after leaving.

It was also interesting, in spite of his seeming unhappiness over the EU’s stance, that Mr Sunak back in November was emphasising he was still firmly of the view that reaching a “comprehensive set of mutual decisions on equivalence” would be in the UK’s interests.

Reaching such agreement would, surely, have constituted “action” and “not rhetoric”.

However, Mr Sunak conceded in his Mansion House speech that equivalence had not come to pass.

The Chancellor said last week: “The UK has an abiding interest in a prosperous and productive Europe. We have deep shared values and a long history of cooperation. And we will strengthen those ties.

“At the same time, as I said in Parliament in November, our ambition had been to reach a comprehensive set of mutual decisions on financial services equivalence. That has not happened.”

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So, after revealing that ambition had been dashed, how did Mr Sunak continue his speech?

He declared: “Now, we are moving forward, continuing to cooperate on questions of global finance, but each as a sovereign jurisdiction with our own priorities.

“We now have the freedom to do things differently and better, and we intend to use it fully.”

Back to the rhetoric: “differently and better”, “freedom”, “intend to use it fully”.

But Mr Sunak’s observations on the failure to reach agreement on equivalence sounded defensive in parts, jarring with the Tories’ bullish global Britain message.

The Chancellor said: “But I can equally reassure you: the EU will never have cause to deny the UK access because of poor regulatory standards.”

It is, of course, good to hear a commitment to high regulatory standards, not that this should be in doubt for a major developed nation such as the UK.

Mr Sunak went on: “So I see no reason of substance why the UK cannot or should not continue to provide clearing services for countries in the EU and around the world.”

This did not sound like the most confident statement in the world. It came across as a hope of hanging on to what the UK had as part of the EU, amid uncertainty created by Brexit. And the words, however they were meant by Mr Sunak, may be interpreted by some as tinged with doubt.

As always with Brexit, it is clear that much is “different” but it remains impossible to see what is “better”. The “better” thing just sounds like rhetoric. As does the “sovereign” stuff.