Kristian Rouz — British big business, represented mainly by the financial corporations of the City of London, is supporting the Cameron cabinet's intention to avoid the UK's possible dissociation from the EU, as the increased political risks involved with the process of ‘Brexit' could potentially undermine Canary Wharf's leading role in global finance. Among arguments, provided by CEOs of at least a third of the UK-based corporations, are imminent economic slowdown and losses in the job market set to occur should Britain exit the EU. Hardly the corporate sector is concerned with performance of macro indicators; yet, the financial power of the UK is indeed likely to diminish in case of a ‘Brexit': volatility and lack of clarity in London would mean sharp deteriorations in investment appeal and financial market performance.
The possible ‘Brexit' has stirred concerns and has already negatively affected the British financial sector, with the sterling declining against the dollar to $1.41, below its 52-week trading range of $1.42-$1.60. Consequently, British financials, primarily, banks are seeing their international presence at risk based on Brexit fears. London's FTSE stock indices have also been declining since the ‘Brexit' referendum was announced, meaning there is a lot to lose if Britain exits the EU.
Some 200 British businesses, including 36 of the UK's 100 FTSE-listed biggest enterprises, issued a public statement (published in the Times) saying that economic segregation from the EU would impair growth and living standards in Britain. Among the companies are not only financials, like HSBC and Goldman Sachs International division, headquartered in London. Telecom giant BT, apparel chains Marks & Spencer and ASDA WMT, and oil enterprise BP also signed the petition.
"Business needs unrestricted access to the European market of 500 million people in order to continue to grow, invest and create jobs," the publication read. "We believe that leaving the EU would deter investment, threaten jobs and put the economy at risk. Britain will be stronger, safer and better off remaining a member of the EU."
Boris Johnson, mayor of London, announced on Sunday he would join the campaign for the UK to leave the EU and the news shook British financial markets early this week.
Big business is backing the Britain Stronger in Europe 'In' campaign, along with the Conservative cabinet led by PM Cameron.
"A vote to remain offers the best of both worlds — it secures our place as a powerhouse in the global economy, while remaining in the world's largest free trade zone," John Holland-Kaye, CEO of Heathrow Airport Ltd., said.
On the other hand, the ‘Out' campaigners reiterate the UK's membership in the EU involves an abundance of unnecessary bureaucratic regulations, increasing costs of doing business. Big corporations are well built-in the complicated structure of European bureaucracy, they say, but ‘true entrepreneurialism' is at risk in the UK as conditions for starting a business have been eroding amidst the EU's environmentalist urge, while unresolved issues of immigration and border control have led to increased competition in the UK's job market.
"Brexit will reduce unnecessary regulatory burdens and cost on business, which can be used to invest in more jobs, not less," Richard Tice of Leave.EU said.
"Either the circus of the financial markets is located in London or it's going to be somewhere else," Ralph Hamers, CEO of the Dutch bank ING Groep NV, said.
The Labour party, leading the shadow cabinet, is surprisingly also favoring the ‘In' campaign, saying the UK's industrial production is driven by the mainland's demand. However, manufacturing is not a key sector of the British economy — banking and finance are.
"For UK manufacturing jobs, our EU membership is absolutely critical — two-thirds of British jobs in manufacturing are dependent on demand from Europe," Alan Johnson of Labour Party said.
After all, the ‘Brexit' scenario might stir only a short-lived distress in the British economy. The London-based offshore renminbi trading, as well as otherwise extensive financial ties between the UK and East Asia, would hardly suffer any consequences at all. Deep economic involvement of the UK in the nations of the Commonwealth will also remain. However, the global financial circuit, represented mainly by big international banks, has gotten adjusted to the comfortable perception of Europe as single market.
Either way, during the coming four months left till the referendum, ‘Brexit' news will largely be determining market news from Canary Wharf.