LONDON â€" The British Bankers’ Association and Citigroup have filed notice with the British government strongly backing a single market, the European Union. The two are emphatically encouraging Britain to step up its influence in Brussels rather than pull back as public sentiment in Britain for inclusion in the European Union wanes.
Both groups wrote letters to the Treasury recently in response to the government’s so-called balance of competences review, which is examining the power divide between London and Brussels.
The support of the financial sector was not surprising, but comes as David Cameron, the British prime minister, has pledged to call a referendum on the Britain’s membership in the European Union in 2017. There is ample popular sentiment against being part of the union, for reasons including immigration and bureaucracy. A group of legislators recently wrote to the prime minister, demanding a veto over European Union legislation.
Bankers do not seem to share those sentiments, even though they have had plenty of issues with European Union policies. Among the biggest complaints has involved the European Union law that tries to limit banker bonuses (the British government has sued over the issue in the European Court of Justice), a tax on financial transactions and a rule limiting short-selling during major market dislocations (the court upheld that rule on Wednesday).
Despite such issues, Citigroup said that leaving the union would have a “dramatic†effect in reducing investment, jobs and growth, wrote Maurice Thompson, Citi’s country officer for the United Kingdom and vice chairman of banking in Europe, Middle East and Africa.
The letter said that there was mounting concern among the banks’ clients “about the continuing ability to use the U.K. as a regional hub if the U.K. were to loosen its ties or influence within the E.U.†Mr. Thompson acknowledged that international companies would not stop investing in Britain, but he suggested they would invest a lot less.
He also explained that Citigroup chose London for its largest foreign office for two reasons: one, London is a major global financial center, and two, Britain’s access to the single market. “We believe that (1) is no small part a function of (2),†he wrote.
The letter from the British Bankers’ Association suggested, in typically gracious and deferential language, that Britain needed to seriously up its game in the European Union.
The number of British nationals working in the European Commission has fallen 24 percent in seven years. Britons represent only 4.6 percent of the total commission, compared with 9.7 percent for French nationals.
“The single market for financial services is a significant factor in the success of the U.K. as a financial center and therefore of considerable value to the U.K. economy,†the trade association said.
Within the single market, Britain has a 36 percent market share of the wholesale financial services market. From 2001 to 2013, the country’s share of the over-the-counter market has grown to 49 percent, from 35 percent, and its share of the foreign exchange market has grown to 41 percent, from 33 percent. Hedge fund assets have doubled to 18 percent.
In the letter were some interesting facts: The French have 0.2 credit cards a person, compared with 1.2 cards a person in Britain; a 15.8 percent savings rate compared to Britain’s 5.4 percent; and a consumer credit market of 140 billion euros, compared with 300 billion in Britain.
