L ast Friday I popped into Thomas Cook on Fleet Street to buy some Austrian schillings ahead of a weekend in Vienna. Nothing doing, though the helpful assistant said he could order me some. Or I could have euros in travellers’ cheques.
How good it will be, I mused, as I walked away past Goldman Sachs – where probably something like the national debt of Austria was being traded in the time it took me to walk the length of its Palladian old Telegraph frontage – to be able in the new year to buy some euros from a hole in the wall for such a trip.
This is tourist stuff, of course, and there will be euro-nightmares next year as well as new conveniences. But, generally, the convenience of being able to head to a euro-zone country without having to fret about having the right money for the first taxi over there is a paradigm for why British business, I believe, overwhelmingly wants a referendum soon, a “yes” vote and an early entry to European Monetary Union (emu). It’s just easier.
Former chancellor Kenneth Clarke knows this. He also knows that the issue of a single European currency is irrelevant to the majority of Britons and that it shouldn’t be an issue in his bid for leadership of the Conservative Party, because it probably won’t be an issue going into the next general election. A referendum will have put an end to the bickering.
In short, the euro shouldn’t be a political issue. It is an issue for business, which
wants a single currency, and for the City, which is ambivalent. Last week, there was a flurry of correspondence in the Financial Times from proand anti-euro bigwigs. Lord Brittan started it with a letter announcing the inauguration of The City in Europe Group, with a founder-membership of 53 grandees from the financial community.
There followed a riposte from The City Not in Europe Group (except they didn’t call themselves that), headed by Alan Brown, chairman of State Street Global Advisors UK. The thrust of their case was that the City of London was just fine outside emu.
I noted that Lord Brittan had led his group in his role as vice-chairman of the banking side of UBS Warburg, while Brian Keelan, managing director of the corporate finance wing of UBS Warburg, was a signatory to the second letter. It’s good to know that UBS Warburg is a broad church – or perhaps the Swiss are, as ever, remaining neutral by using their British lieutenants to cover their bets.
But the serious point must be that, if the City is now to lead the debate on the euro, where does that leave the wider British business community? An uncompromising view might be that it leaves it being led on the biggest issue it might face this century by a square mile of Europe’s most prosperous real estate. An institution, moreover, that exists in part through its ability to exploit British industry and its relationship with other nations.
British industry and the City depend on one another for their prosperity. The former generates earnings, equity values and fat fees for the City, while the latter provides the oxygen of access to the capital markets for investment and expansion. Nevertheless, the idea that British industry should have its future dictated to it by the City is worse than the tail wagging the dog. It’s more like the dog’s food bowl doing the barking.
It’s often said that the City’s ‘invisible’ earnings are a principal contributor to the health of the British economy. Doubtless they are. But they are invisible, in the sense that no one can quite grasp them. The City makes money out of money. It doesn’t actually make anything itself – at least not anything you can hold in your hand, unless you count the long-retired “Loadsamoney’s” wedge.
There’s nothing wrong with that. The City provides a perfectly respectable service to industry, just as a bookie provides a service at a racetrack. I’m not hung up on some sort of ethereal virtue attached to manufacturing over service industries. But it’s as well to recognise that the City collectively enriches itself by taking a turn on everything it does for industry.
It follows that its motives on the UK’s position in or out of a single currency might not be of the purest form. They are City people, and they will try to make it all sound tremendously sophisticated and complex, but you can bet that what they’re trying to work out is whether they, the City institutions, will make more dosh out of the UK in or out of emu.
It might be said that industry is guided by the same motives. But industry is out there importing and exporting goods and services. The City is the limpet – albeit a very fat one – on industry’s bottom. What the City wants to know is whether it can make a better turn with lots of varied currencies and cross-border dealing, or in bonds and equities markets simplified by the euro.
We don’t know the answer to that yet. But we should know that the question of a proper single European market should not be answered by the City, but by those who use it.
George Pitcher is a partner of issues management consultancy Luther Pendragon