Grace Kelly and Prince Rainier met here. It’s where the Pink Panther gang stole $137m of jewels. And today, the Carlton in Cannes is hosting a Brexit discussion lunch.
Brexit. Sounds like a brand of Fifties’ dog biscuits. “Winalot Brexit: for healthy teeth and gums.” On my table, despite the weird name and nine months since the vote, Brexit still provokes fierce rows. Chatham House rule. So no names, but here are the ideas.
“Look, the Leave majority was mostly over 65s. So by the time we actually leave and have a trade deal, ordinary mortality rates mean the UK will be majority Remain!” “That’s offensive - and what about the Left Behinds?” “Isn’t it pointless? Like divorcing your partner and then negotiating for five years to move back in - on slightly worse terms?”
“The EU is a federal project…best get out now on our own terms, and go global.” “One of my Middle Eastern clients said, Yemen and Syria - I would do anything for a problem like Brexit!”
I have another large glass of rosé and wonder what we all talked about before Brexit dropped into our baskets. What is true is that the general economy has so far brushed Brexit aside, but real estate has felt it. How much is not certain, but the amount of UK real estate bought and sold last year was down 25% - and some of that was referendum driven.
Some brilliant points were made about London’s power and resilience. London has 49% of the global derivatives market, 20% of the cross border lending market and 41% of the World’s Forex market. More than New York and Tokyo combined. I knew London was big, but wow!
It must mean London will ride Brexit. Look, it rode the Blitz and even survived not existing for a few hundred years after the Romans left. It can live without the European Union. Frankfurt and Paris cannot suddenly create this sort of infrastructure and take London’s finance crown. But, we shouldn’t be complacent. New York and Tokyo could. The government needs to work hard to get London’s (and the UK’s) financial services industry strong passporting rights and free market access.
One speaker says financial services has been declining as a percentage of London jobs and office occupation since the ’90s. TMT companies are now London’s biggest space takers, and banks are as likely to relocate to Birmingham as Berlin. “Don’t worry that the banks will go, just be thankful they’ve already gone!” This contrarian argument: that London is no longer a city of bankers, but a city of chai-latte sipping creatives, is partly true. But we would still look pretty silly if we lost the massive part of its market that still is traditional financial services. DExEU take note.
There is one area where London can feel Berlin’s post-Brexit breath on its neck. Fintech is more mobile than old financial services. And Berlin is a rising city. Berlin is cool and cheaper than London. So we should wake up and put together a package of post-Brexit measures to help Fintech companies choose Kings Cross, not Kreuzberg.
Brexit is about to begin for real. The Bill has passed and Mrs May’s pen is poised over her Article 50 letter. The ‘Phoney War’ is ending. Businesses need to start preparing and planning now: on trade, people, transition and timing. The two-year Brexit negotiation period will burn-by very quickly. The French and German elections, and the final ratification process, are all expected to shorten the time for substantive talks. This journey is going to be a surprisingly short one. By mid-2019, the UK will almost certainly be out of the EU.
But an Eversheds Sutherland survey this week showed that 4/5ths of UK businesses have no plan for Brexit and are not planning to produce one. So as the Brexit bus moves off, much of UK commerce is asleep on the back seat. They need to wake up and begin informed Brexit planning.
Whether we like it or not the Brexit bus is leaving. We are all on it together. We must all work hard to make a success of the journey and of the global stop that follows. Because future generations won’t judge us by the result of the referendum, but by what we did with it.
Bruce Dear, head of London real estate, Eversheds Sutherland.
16 March 2017
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