When Jamie Dimon said a hard Brexit would be a disaster for the UK earlier this year, the JPMorgan chief executive was articulating a view that is commonly held among London’s investment bankers. But since Boris Johnson became prime minister, some senior bankers who were previously staunchly anti-Brexit now privately say their opinions have changed.
“We need to get it done; the inertia is worse than a no deal,” the head of one large investment bank recently said, despite once warning of the dangers of such an outcome. Another spoke admiringly of Mr Johnson, comparing him to Winston Churchill, and said: “He has come in with a mission. You cannot keep going on and on without a solution. I’m now more on the side of taking us out and planning for the future.”
Perhaps their new-found sanguinity reflects a high level of preparedness in the banking industry, which has been planning for a hard Brexit for years. Global banks that run their European operations from London have set up new entities in Paris, Frankfurt and Ireland, and identified hundreds of staff that will have to move in the event of a cliff-edge exit.
One of the bankers said that a managed exit would not make much difference to his company compared with no deal. Although a long transition period would allow banks more time to plan, the City has given up on securing “mutual recognition” for the financial services industry, and has instead focused on preparing for Brexit, he added.
Cynics might also observe that highly paid investment bank executives will feel little personal pain in the event of a hard Brexit, compared, say, with a car factory worker in the north of England or a sheep farmer in Wales.
These bank executives also seem to much prefer the cut of Mr Johnson’s jib over his predecessor’s understated style. Whereas it is difficult to imagine Theresa May — the taciturn vicar’s daughter — working on a trading floor or greasing the wheels of a large M&A transaction, Boris as banker is not so much of a stretch. They identify with Mr Johnson’s bravado and his penchant for taking big, risky bets.
Then there is their abject horror of a leftwing government led by Jeremy Corbyn, which one top banker said would be far worse for his industry than a no-deal exit. He agreed with Mr Johnson’s view that the Tories risk annihilation at the next election, whenever it comes, if they do not deliver Brexit.
Another executive at a global bank said he thought Mr Johnson could ameliorate the economic impact of Brexit with a public spending spree. “Britain has one of the lowest fiscal deficits as percentage of GDP of any country in the world and the 10-year gilt is trading at 66 basis points. You’re borrowing for free. Why limit yourself to 1 per cent of GDP as a deficit? Take it to two, or three.”
While most recent converts think that a no-deal Brexit would be painful but bearable, one went so far as to say it could be good for investment banking revenues in the short-term, as fund managers put on a flurry of trades to adjust their portfolios to the new reality.
“Theoretically, if you have a disruption like a hard Brexit, you should see higher levels of volatility in interest rates, foreign exchange rates, and credit spreads,” he said. “An intermediary in that world should do better.”
Of course, the shifting of opinions among a handful of bankers — no matter how senior — should not be taken as evidence that the City has switched sides. Lots of senior bankers still think Britain is on the brink of a massive act of self-harm. But perhaps Canary Wharf is not such a hotbed of Remainers after all.