Two of the UK’s private equity heavyweights, both Remainers, disagreed over London’s financial future at MIPIM UK this week.
Guy Hands, chairman and chief investment officer of Terra Firma, argued in the keynote speech that he believed the UK could make itself more business-friendly when it leaves the EU.
With a hard Brexit, he said, the government could impose fewer regulations on companies, replacing the “red tape of Brussels”.
He said that financial services would not move to other areas in Europe because technology has made physical location less of a concern. If any city were to benefit, it would be New York.
“If financial services move out of London, they will move out of Europe. There is not a need to be in one specific place. And there is no way Paris or Frankfurt will replace London in my lifetime or my children’s lifetime.”
However, Sir Howard Davies, chairman of Royal Bank of Scotland, said banks were likely to downsize as a hedging strategy in the event of a hard Brexit.
He warned that the UK would become less productive, emphasising that economic forecasts showing 2.1% growth are not meaningful because the country has yet to leave the EU.
Already, he said, the economy is underperforming despite low inflation and near-zero interest rates. Davies said: “We have modest growth, with all the monetary indicators as green as they can be, and there is not much the monetary authorities can do if growth slips back.”
Although commercial real estate capital values have already fallen by 3%, the drop was in part due to the hike in stamp duty earlier this year, Davies said.
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