Wow. As U-turns go, this one takes some beating. TheCityUK, the main lobbying arm for the financial and associated business services sectors, appears to have suddenly embraced Brexit. In common with all the other big City groups and all the big banks, it was strongly in favour of remaining in the EU, seemingly at almost any cost. It argued loudly that the status quo, and especially the rules governing access to EU markets, was worth the cost in terms of counter-productive regulations, such as banking bonus caps or inappropriate, absurd Solvency II insurance rules.

No longer: its latest missive appears to have been penned with the zeal of the convert. The press release is entitled “TheCityUK hails opportunity for trade and investment policy reset”. While it obviously remains worried about the threat of protectionism from the EU, its new report emphasises the upsides of developing new markets.

Around 33pc of the UK’s exports of financial services go to the EU, which also accounts for roughly 40pc of Britain’s trade surplus in financial services. There is no doubt, therefore, that Europe is a crucial market for UK financial services firms. But it’s not that simple. The EU actually matters more to other sectors of the economy (44pc of all our exports of goods and services now go to the EU, a fast-declining share). Even more importantly, as TheCityUK points out in its new report, “over the next 10-15 years, 90pc of global economic growth is expected to be generated outside Europe and these markets – developed and emerging – must be a priority focus for the country post-Brexit”. In other words, we need to fight to retain as much access as possible to the EU, but our long-run future lies in trading a lot more with other economies, including emerging and already developed countries.

A recent Financial Services Briefing by Shanker A Singham and Victoria Hewson, published by the Legatum Institute, put this very well. It points out that international and wholesale banking business related to the EU is between 20pc-25pc of the total. That’s a big number, helped by the availability of passporting, but still means that a huge amount of business is conducted by the City without any passporting mechanism. We shouldn’t obsess about the minority of activity that goes to the EU while neglecting the majority that doesn’t.

David Fuller's view

Allister Heath describes himself an optimist.  He certainly is but a very sensible rather than greedy optimist.  If you can keep that emotional balance and are interested in the markets, and also look at charts for evidence of relative strength plus the eventual crossover to weakness, you will do well in the markets. 

Here is a PDF of Allister Heath’s article.

See also: City lobby group comes out fighting for global Brexit in Dramatic u-turn)

My advice: be wary of group opinion.  It deadens analytical thinking and produces peer-pressure conformity.  Be particularly wary of something with ‘lobby group’ in its name.  Those are lobbyists, rather than analysts. 

While one wonders what it was about the EU which mesmerised them, at least they had the eventual wit and character to change their minds.