The contest to be Conservative Party candidate for Mayor of London is well underway, with three shortlisted candidates – London Assembly members Andrew Boff, Shaun Bailey and Ealing councillor Joy Morrissey – facing a ballot of London party members next month. Timed to allow a lesser-known candidate to build a brand and bond with Londoners in the 20 months before polling day in 2020, the Tory battle takes place at an unusual and unenviable moment for the metropolis.
London is Europe’s most important city, with twice the population of Berlin and four times that of Paris. Yet it is not clear how far or fast the capital may be cut off from its largest market, responsible for half the United Kingdom’s trade. For the UK to become a “third country” vis-à-vis the European Union from its previously seemingly settled status at the heart of Europe’s single, 28-nation, half-a-billion-people market and customs union would be a seismic event.
Into this potentially perilous and colossal change, Tories are proposing Brexit in a city that voted 60 to 40 per cent to Remain. The party is also dramatically reversing long term policy: quitting Europe’s single market, a Thatcher-era reform ensuring EU-wide free movement for goods, services, capital and people. The latest government plans would place protectionist barriers between the 92 per cent of London’s economy that are services and the 20 per cent that are financial services, and their main market.
Tories introduced the City’s “big bang” 1980s deregulation, but now prepare to sacrifice lucrative “passporting” rights, which presently allow UK financial services to operate with the same ease in Lisbon as in London. Consequently, London bankers may no longer be able to raise capital for or advise EU firms on today’s terms, placing London’s position as Europe’s leading financial centre at risk. Strikingly, protectionist policies have not adorned the Conservative Party line since the 1932 Import Duties Act ended free trade outside the Empire.
U-turns aside, the government’s “Chequers compromise” is proving a hard sell. The EU does not care for this belated, bruised bid to unilaterally redesign its single market and customs union – presented eight months before the UK’s pre-announced departure date. Meanwhile, Tory members reportedly oppose the plan by two to one because it insufficiently meets nationalist demands for repatriated powers. Yet the London party has fared badly under the national party’s recently adopted Hard Brexit banner, losing six parliamentary seats last year and 101 councillors net this.
But when the winning Tory mayoral candidate surveys the London landscape, it may be apparent that the worst may be yet to come. Amid political paralysis and diplomatic deadlock, blue chip companies are reluctant to enter the fray. However, actions speak louder than words. Household names Airbus, BMW, EasyJet, Jaguar Land Rover, Rolls-Royce, Siemens, and Unilever have joined financial behemoths Bank of America Merrill Lynch, Barclays, Goldman Sachs, HSBC, JP Morgan Chase, Morgan Stanley, and UBS in making relocation plans.
This vote of no confidence is underscored by institutions and individuals prepared to break cover, from the City of London Corporation, which urges single market access including a continuation of passporting, to the former Lloyd’s of London chairman who wants a referendum on any Brexit deal.
Hard-headed commercial judgement is making itself felt pre-Brexit and before the fabled “transition” period, during which EU rules are to be followed without the UK having the capacity to shape them, tentatively scheduled to last through 2020. But today’s trickle of City and Canary Wharf jobs and investment to Dublin and Frankfurt may become a flood as and when EU member state regulators require entities under their jurisdiction to be based within EU territory.
The stakes are high. If London ends up outside Europe’s single market and customs union, £42 billion of investment and half a million jobs could be lost by 2030 – a decade after the next mayoral election – according to Cambridge Econometrics, a data analysis firm founded by the University of Cambridge.
London generates a quarter of the nation’s growth and one-third of its tax revenues, so any decline in its fortunes is quickly felt nationwide. Financial services are the UK’s largest industry, comprising 12 per cent of the nation’s economy and providing 10 per cent of the government’s entire tax take. One in six London workers – one in five in the City – are EU nationals, significantly contributing to the city’s productivity, tax revenues and diversity, a strength built up by the free movement of EU citizens. Sadly, this precious asset too is threatened by retro nationalism.
The capital’s Labour Mayor, Sadiq Khan, strongly supports continued membership of the single market and customs union, in opposition to Labour’s leadership. Among parliamentarians, two London Tory MPs – Wimbledon’s Stephen Hammond and Bromley & Chislehurst’s Bob Neill – defied government whips to back a customs union if no Brexit deal is reached, while one London Labour MP, Vauxhall’s Kate Hoey, voted for the government’s Hard Brexit plans.
Will the Tory mayoral candidate use his or her freedom to deviate from national policy and back continued unfettered access to Europe’s giant transnational market? All three reportedly voted for Brexit, but Boff has said to On London, that the UK must agree “something close to Norway’s relationship with the EU” and “protect our financial sector’s passporting rights”. Tory MP Justine Greening, whose Putney constituency voted Remain by 73 per cent, has backed a People’s Vote on any Brexit deal, with a Remain option included, while the mayor has indicated that he is open to this idea or tp another general election as a resolution mechanism should parliament reject any Brexit deal.
Majority citywide support for Remain and aversion to a Hard Brexit is strengthening, according to new YouGov polling and data analytics from Focalpoint. This finds voters in all but six of London’s 73 parliamentary seats back Remain, down from 16 in 2016. London’s five Tory and the one Labour Leave constituencies lie on its eastern edge, bordering Essex and Kent. Now two prominent Brexiteers in Remain constituencies – Chingford & Wood Green’s Iain Duncan-Smith and Chipping Barnet’s Theresa Villiers – are joined by Boris Johnson, whose Uxbridge & Ruislip South seat has flipped from Leave to Remain. All three are Tory marginals.
The question is: Will the Tory mayoral candidate speak for London?
