Ben Wright: Sideline banking and Brexit will fail

Mark Carney, the Governor of the Bank of England. Photo / Getty Images

Whether you are a in favour of leaving or remaining, one thing that almost everyone can agree on is that the Brexit process needs to be handled carefully.

The UK's departure from the European Union may hurt the economy in the short-term or it may not; if there's to be pain, it could be mild or severe. We can sit around arguing about such forecasts until we're all blue in the face. But one thing is certain: if the process is bungled, it will be catastrophic.

That being the case you would have thought that the Government would have a laser-guided focus on what Brexit means for the economy's most important sector. They should be swaddling it in cotton wool, tissue paper and bubble wrap and then placing it on fluffy cushions during the Article 50 process.

Unfortunately, the opposite appears to be the case. In fact, the economy's most important sector has been stuffed in the back of the wardrobe and forgotten about. The reason, of course, is that the sector in question is financial services.

And bankers are politically toxic.

Since Brexit was, at least in part, a reaction to the pressures placed on society by the austerity resulting from the financial crisis, how can the Government be seen to be prioritising the industry that caused the crash in the first place?

The answer, of course, is that it is also the industry that has helped power the recovery and which funds our vital public sources.

Mark Carney, the Governor of the Bank of England, spelt out the reality in stark terms at last month's Mansion House speech: the taxes paid by the financial services industry cover two-thirds of the annual running costs of the NHS. We neglect this golden goose at our peril.

It is bad enough if such heedlessness is the result of political expediency, it is something quite different if it is the result of naivety. Senior City figures who have (on too few occasions) met with ministers are at their wits' end.

Initially, politicians understood the importance of the City to the economy but refused to believe that bankers would up sticks and move to Frankfurt. (I mean, have you ever been to Frankfurt?)

More recently ministers, especially those in the Treasury, have begun to realise that it is a tiny bit more nuanced than that. Many of those who work in the City were born abroad and have been made to feel unwelcome by Theresa May's attack on "citizens of nowhere". Highly paid bankers also tend to go where the high pay is.

And it's not so much the people that will be moving from the UK to the EU as the jobs. Just when City lobbyists felt they were getting somewhere, May called a snap election.

This pressed the pause button on discussions and then threw all the pieces of government up in the air. Four out of five ministers in the Treasury either lost their seats or were moved out of the department; all of the ministers in the Brexit department, barring David Davis himself, have moved on for one reason or another.

The City has to start all over again explaining why, if it ends up being a "hard" Brexit, then there will be a whole load of stuff that used to be done out of London that will legally have to be done somewhere else. It's a thankless enough task banging your head against a brick wall without being presented, some 22 months before the Article 50 deadline, with fresh brickwork.

There is potential cause for optimism in the EU's recent moves on euro-clearing.

These stopped short of the "land grab" that many in the City had feared and could set up a workable model for future cooperation on financial services.

But it is telling that the first move came from the other side of the channel. British politicians need to get their heads around what Brexit means for the City and soon. Otherwise Brexit will be holed below the waterline before it has even left port.