Written by Matthew Dove (Digital Editor)
You’re bored of Brexit, I’m bored of Brexit, Hell, even Barnier’s bored of Brexit. As far as historical harakiri goes, Britain and Northern Ireland limping out of the European Union will surely rate as one of the most tedious…
However, for better or (much, much, much) worse we’ve made it this far, and perhaps, with TFT holding your hand, you’re willing to come a little further…
So, how on earth did we get here in the first place?
The image of a foppish little Scotsman called Fred Goodwin still provokes an eye-bulging level of ire in certain circles and the reason for poor wee Freddie’s lack of popularity is simple; he’s an absolute banker.
With spending habits which would embarrass the Sun King and an unbridled arrogance to match, this walking, talking hubris factory typifies everything Brexiteers loathe about what they consider be a sneering neoliberal elite.
Fred the Shred’s blind faith in the so-called free market and insatiable avarice led the Royal Bank of Scotland straight into the poor house, or more accurately, state ownership. At the height of the crisis in 2008, Goodwin managed to exit stage left with a 300 grand pension and a £2.7 million bonus for good measure.
If RBS’s £45 billion bailout and subsequent decade sans profit have taught us anything it’s that the real freedom the market enjoys is the freedom to fail. Whilst most of us are leaning, grim-faced into a chilly capitalist reality, Freddie and friends knew that when they fell, the taxpayer would catch them. Shitting the bed never felt so good!
“‘We all too often have socialism for the rich and rugged free market capitalism for the poor.”
Dr Martin Luther King Jr.
Subsequent to that fateful afternoon at the ballots in 2016, many efforts have been made to identify the true target of the Brexit tantrum. The job-seeking immigrant and the Brussels bureaucrat are perhaps the easiest to spot, but look a little closer and “the characteristic villain of our day” remains the humble banker, bless his ill-gotten cotton socks.
Bear in mind that the average worker has seen little improvement in their lot for years and, if anything, the next generation will be even worse off. The rise of populist causes in Europe, most notably the Brexit campaign, and the election of Donald Trump in the US, reflect the disaffection many feel towards established political institutions and the private enterprises they so consistently prop up.
Ian McKenna of the Finance & Technology Research Centre offered TFT his own view on the origins of Brexit;
“As time goes on, I think it is increasingly clear that, for many, Brexit was a vote against the status quo, millions of people who don’t usually vote made a protest but the political establishment deflected their anger at the EU, with disastrous consequences.
Equally politicians, right and left, encouraged by the red top media have used the EU as the people to blame every time they had an unpopular policy for the last 50 years rather than own the issues themselves. In time, they may regret not having the EU to blame for everything.”
If Brexit is the populist bastard of privatised greed and state sponsored complicity, then the real flesh and blood children of the financial crisis are surely the fintechs.
Financial innovations in sectors as diffuse as cryptocurrency, APIs and peer-to-peer lending can all trace their origins back to the 2008 debacle. Young pretenders like Monzo, Yolt and Emma owe their places in the market to measures like open banking, an initiative designed to lessen the hegemony of the big banks. The first Bitcoin transaction was emblazoned with the words, The Times 03/Jan/09 Chancellor on brink of second bailout for banks, words serving as both a timestamp and a nod to its ideological beginnings.
Along with the incumbents they set out to disrupt, the fintechs now face their biggest challenge yet. Brexit has been described as “the mother of all unforced errors” and its fallout could be huge.
Even the figures are beginning to echo those of 2008/9 as last year the UK’s economy slumped to its lowest annual growth rate since the crisis. It grew by a mere 0.2 percent across 2018 (1.4 percent overall) and contracted by 0.4 percent in December. This leaves the UK ahead of Italy only in terms of the continent’s leading economies and suggests that Brexit anxiety is finally taking its toll.
Mark Carney of the Bank of England has essayed an unemotional vision for a post-Brexit Britain which includes property prices plunging 30%, unemployment hitting 10% (up from around 5 today), net emigration from the UK, inflation, higher interest rates and so on and so on…
Try as he may (excuse the pun), Phil “The Spreadsheet” Hammond converted only the choir when he opined a sunnier outlook recently. Referring to a forecast which runs until 2023, Hammond was quoted in the FT as having said that;
“The UK’s economy continues to grow and remains fundamentally strong. Growth of 1.4% in 2018 means the UK has grown every year for the past ten years and the Office for Budget Responsibility expects it to continue growing in every year of the forecast”
However, with just 4 of the “40 trade deals ready for one second after midnight” on 29 March being tentatively agreed in negotiations trade minister Liam Fox claimed would be “the easiest in human history”, that forecast may require some rigorous adjustment.
In the short-term, the Bank of England places the chances of a recession in 2019 at one in four.
So, the banks caused it, regulators let it happen and the fintechs couldn’t stop it… Brexit, that most movable and unedifying of feasts, is sitting in the middle of the table and we’re all going to have to take a bite.