In messy break-ups, among which Brexit is set to figure, the departing partner is tempted to taunt: “See how you get along without me!” The danger is that they will later chance on their ex insouciantly shelling beer nuts in his vest and getting along just fine. So City folk should not seize too readily on Financial Conduct Authority data that show more continental financial groups rely on locally-granted “passports” to operate in the UK than vice versa.
This might look like a stick with which Theresa May can wallop fun-loving European Commission president Jean-Claude Juncker during leaving negotiations. More than 8,000 businesses from 30 nations are using local passports into the UK compared with 5,500 heading the other way.
It is a useful reminder that free trade is mutually beneficial. The data will hardly persuade European politicians to cut the UK any slack, though. According to another breakdown from the FCA, the bulk of inbound passports were granted under the insurance mediation directive. This covers some access to the important Lloyd’s wholesale insurance market. Most of the passport holders are retail insurers.
Registrations under Mifid, the directive pertinent to investment banking, matters more to the future of the City of London. Here, outbound passports predominate by 2:1.
There is a further snag. Continental banks and brokers value the access to international capital the City gives them. French and German politicians value the votes of Parisians and Frankfurters too, and are in a better position to influence negotiations for local economic gains.
Grandees envisage a so-called “Switzerland-plus” deal in which capital continues to flow freely. Their arguments for the EU to offer this contain more holes than cheese from the same Alpine nation. Barring a revolt against migration across member states, the City is set to lose a chunk of banking and trading while reinventing itself as an offshore centre.
Incidentally, remember how hedgies such as Crispin Odey rallied to the cause of Brexit before the vote? It transpires four times as many hedge funds rely on a UK passport to trade on the continent as vice versa,. “Be careful what you wish for” is the phrase that springs to mind.
Walmsley’s chill to costs
Because she’s worth it? Emma Walmsley, a former L’Oréal executive, has won the contest to become chief executive of GlaxoSmithKline. A businesswoman with a background in cosmetics will lead the UK’s premier science company, a role which last year paid Sir Andrew Witty £6.7m.
It is an eye-catching appointment. Ms Walmsley, who has a arts degree, heads GSK’s £6bn-a-year consumer healthcare division. Less than a year ago investors were agitating for the group to sell the business.
That spin-off will be even more unlikely when Ms Walmsley takes over from Sir Andrew. She has brought the culture of companies that sell toothpaste and detergents to GSK.
Stuffier investors will bridle at the appointment. The function of make-up is to prettify customers, not save lives, they will harrumph.
GSK taps consumer goods veteran Emma Walmsley as new chief
Andrew Witty to step down in March 2017
The counterpoised risk with appointing a scientist to run GSK is that he or she will fall in love with the science, which can be costly. The company is wrestling with the expiry of patents on Advair, the respiratory drug with peak sales of around $8bn.
Ms Walmsley’ is likely to pursue “externalisation” in drugs discovery, favouring numerous partnerships with biotechs over a few big bets on treatments created in house. You can see how that policy might suit Neil Woodford, an influential shareholder. He wanted an external candidate to lead GSK, but is also a fan of biotech.
There is one snag. GSK has national champion status in drug development. Less of that in-house could mean fewer jobs for UK scientists. Politicians wouldn’t like that. Ms Walmsley is a toughie, apparently. She’ll need to be.
Norfolk farmer Bernard Matthews thought his turkeys were “bootiful”. Pensioners are unlikely to say the same of the pre-pack administration through which 2 Sisters is buying the business. The defined benefit pension scheme may wind up in the Pension Protection Fund, triggering haircuts for members.
Pensions consultant John Ralfe points out that if vendor Rutland Partners has lent money to Bernard Matthews, it could be in line to get a payout from administrators. Companies House data shows the largest element of the poultry farmer’s financing does indeed appear to be a £24.6m loan note owed to funds managed by Rutland.
Bernard Matthews paid interest of £3.4m on this in the last recorded financial year, helping turn a £1.8m operating profit into a £5.6m post-tax loss. That compares with contributions of just £800,000 paid to the company’s pension scheme, whose deficit had risen to £16.7m. Plenty for the Pensions Regulator to ponder.