Q&A: City's EU rep on Brexit tactics and his old boss Theresa May

Micha Theiner

Jeremy Browne (right) in conversation with FN editor Gren Manuel

This is an edited transcript.

Gren Manuel, Financial News: You’ve travelled widely in Europe since the vote. What’s your assessment of the mood across the table from the UK:

Jeremy Browne: I sometimes try and illustrate the task that Britain faces in a graphical form with two axes. The first axis, you can put emotional to pragmatic and then the other axis you can put political to economic.

So Jean-Claude Juncker, the President of the Commission, for example, is right up in the top right corner. He is deeply emotional and political, because for him the prime imperative is the institutional preservation of the EU. Even if there is an economic price to pay for people living in Europe, that is a price worth paying in order to stop the EU just breaking up.

If you go to the other end of the scale, such as the Dutch federation for exporters, for instance, they are right down in the pragmatic, economic space. They don’t want the EU to break up but they are more interested in the fact that Britain is the third biggest trading partner of The Netherlands and they don’t want to see their way of life disrupted by unnecessary trade barriers.

The task, I think in a way, is to try and migrate people across the dots, across from the top right to the bottom left of the graph because that will make a successful negotiated outcome much more likely.

FN: When you have been out and about talking to people even within countries, is there not a spectrum, a splintering of views, even within countries?

Browne: Yes. In fact, even within governments, finance ministries tend to be more pragmatic than foreign affairs ministries. And then definitely there is a striking contrast between what politicians think and what businesses think.

So one of the forces that we need to bring to bear on European governments who are going to negotiate this conclusion is the business interests within their own country. It’s much better that the messages come from them rather than the British government.

FN: How high will finance be in the list of things to negotiate?

Browne: It is in the interests of corporates and governments right across Europe that we don’t have a disaggregation of the financial services sector that serves them well. It might be in the narrow short-term interests of Paris or Frankfurt to get 5,000 jobs from London, but is it in Europe’s medium-term interests to try and break up its one indisputable global asset in this area? I think the answer is self-evident in that it isn’t.

But that means the politicians having to get over the hang-up of the fact that the [EU’s] financial centre won’t be in the EU but that it is still beneficial for them to have it on the continent of Europe.

FN: I have this feeling when I go to lunch with people in the City that everybody is feeling pretty upbeat about the negotiations. They think we might go into the EEA, have a few restrictions on immigration, and frankly life will go on pretty much the same. Is that realistic?

Browne: There are quite a lot of people in the City who are trying to convince themselves that the world after June 23 can pretty much resemble the world before June 23 and I think that is unlikely to be an accurate assumption.

I think the question is not whether we are going to have Brexit or not, but what form it takes, so ‘hard Brexit’ or ‘soft Brexit’ in political jargon terms.

I am not at all sure that the Europeans will be willing to deliver something easy and palatable to us. I don’t just say that as a sort of hand-wringing, defeatist Brit, I say it as trying to have a genuine calculation about where they see their interests.

But I am also not at all sure that the British government will pitch for ‘soft Brexit’ anyway. I don’t think that option is the centre of opinion within the Conservative parliamentary party.

If you think that Britain should be an independent country and that the European Union is this appalling statist, sclerotic, doomed-to-fail supranational project, you don’t want an association with it which 95% resembles what it would be like inside. The whole point was that you voted to get out.

I can’t see any way that any politician could interpret the referendum result in Britain as a mandate for no change whatsoever on European migration obviously to Britain. And so if the Europeans are telling the truth when they say that being in the single market is conditional on observance of the ‘four freedoms’, [one of which is freedom of movement], then it’s not possible for us to be in the single market.

Then where does that leave us? It seems to me it leaves us with a desire to try and find a pragmatic outcome with as few barriers to trade between the EU and the UK as possible and it is in the Europeans’ interests to do that.

I think, on goods, you can see an obvious deal that could be done. The problem in financial services is how are they regulated and do we try and keep regulatory equivalence, which seems to me a way that you could trade across the single market without being in the single market.

The problem, of course, is that you are stuck observing all the rules of a club that you have just voted to leave and what’s more, previously you had an ability to contribute to the making of those rules and now you don’t.

Unless – and this would be quite an audacious pitch for a British government to make, but it could do – unless it says ‘We are so significant in financial services that we will agree to maintain equivalence rather than compete with you on the regulatory environment, but the condition of that is that we have the rules set jointly by the UK and the EU’. We’ll see how [EU President Jean-Claude] Juncker responds to that one, but it’s a pitch we could make.

The only way I could see this EEA, single market, Norway plus, Norway minus, sort of soft Brexit, is transitionally – a sort of four-year EEA status so that we go out in stages.

FN: If we want the City to grow, some people say we need to get out of this European club, deregulate, and chase where the new money is, whether it’s South Korea or Shanghai, or anywhere basically, anywhere apart from the other side of the Channel.

Browne: I think we may try and compete with the rest of Europe on further cuts to corporation tax, for example, but I don’t think there is a big appetite for trying to compete with the rest of Europe on being lighter touch on regulation.

In fact, quite often I detect almost the British government having a zeal for boasting that we are tougher – slightly counter-intuitively – that you come here and you really get toughly regulated. And, of course, in a way the London brand of it is that we are a rules-based, rule of law society. You can be entrepreneurial but you do it on the foundations of properly applied, well-understood rules.

FN: Tell us about your former boss, Theresa May. [Browne served under May at the Home Office]

Browne: I think most of what you read is true. She is very diligent, she is very assiduous, she is very thorough. She works very hard, she likes detail, she is the polar opposite really of how you would imagine Boris Johnson would approach a task, which is why appointing him [as Foreign Secretary] was really interesting because it was so counter-intuitive.

But Theresa May is not someone whose heart would race at the prospect of a blue-sky thinking awayday. She would think that that was pretty much a waste of time and you could be in the office doing some proper work.

She is very micromanaging. I think that, in part, enabled her to survive as Home Secretary for six years because it is a department where detail matters and where little things can go wrong.

But [while] I think it is possible to micromanage a government department if you work very hard, it is not possible to micromanage a government.

The question will be where she chooses to focus her micromanagement and where she has to, against her better instincts, let go a bit. My guess is on this area [Brexit] she will keep a pretty tight rein and people say “Who is going to lead for Britain on the negotiations? I think the answer is Theresa May.

She is also not a person who particularly trades off. [In negotiations in Europe] quite often the modus operandi is civilised, sophisticated… “If I give you a bit of this, you can give me a bit of that”. I think Theresa May, in her quite literal-minded way is more likely to think “On both of these areas I think I am right and you are wrong, so why do I want to concede one to you?”

You could say that shows a commendable Thatcherite level of steel, or you could say that we are never going to make any progress on anything, so it will be interesting to see.

Audience member: What is your sense of when the UK negotiating position is going to be ready? Secondly, when you do think we are going to invoke Article 50? Thank you.

Browne: On the first one, the broad parameters in three or four months’ time, before Christmas.

It can’t take too long because there are a lot of people in the City and elsewhere who are a bit nervous and they are willing to wait months, but they are not willing to wait years before making business decisions and they want some clarity that progress is being made.

That will then enable you to trigger Article 50 early in the new year with a two-year timescale.

Audience member: In terms of EU nationals, do you think there will be some paper documentation with respect to their passport/visa, something that one would have to remain within the UK?

Browne: My hope and, I think, belief as well is that it will be less onerous than quite a lot of Remainers fear. There is an awareness on the Leave side with people in government and elsewhere that Britain, and London specifically, is a global, outward-looking economy. I suspect the bar will be set quite low, especially for existing residents.

More from Investment Banking

Let’s block ads! (Why?)

Investment Banking – Financial News Online

You May Also Like