A Tale of Two Cities: Cronyism in Brexit Land

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of Speaking of Europe’s editorial team.

On the 25th of June 2018, Bloomberg News published an article which they dubbed “The Big Brexit Short”. In this article, journalists Cam Simpson, Gavin Finch, and Kit Chellel published the results of their investigation into the role private polling companies and hedge funds played in the Brexit referendum of the 23 of June 2016. Private polls, they found, correctly predicted the outcome of the referendum and were used by hedge funds to profit from the collapse of the British Pound. Their most poignant finding, however, was that Nigel Farage, the face of the Vote Leave Campaign, had access to such polls and used the media attention he received to increase these profits even further.

Why is this relevant? Well, it shows that he, and other Brexiteers like him, may have had other intentions when they convinced the British public to “take back control”. Recently, a Dutch professor of contemporary European history by the name of Mathieu Segers, published a piece in Het Financieele Dagblad, a Dutch newspaper focused on financial matters. In this piece, he argued, based on the research of two French journalists at Le Monde Diplomatique, that the real motivation Brexiteers had for wanting to leave the European Union had little to do with ‘sovereignty’ or some desire to ‘control their own borders’ (whatever these things may mean). Rather, it was to convince the British electorate to vote for policies they would otherwise never have voted for.

In his piece, Segers cites the French researchers as having found that 57% of the funding for the Leave campaign originated in Britain’s financial sector. Moreover, out of all financial contributions from the City of London, the financial heart of the UK and indeed the world, 90% seems to have gone to the Leave Campaign. But surely, you may ask, this can’t be right? After all, isn’t the prominent position of the City the result of the UK’s membership of the bloc? Well yes, but this does not necessarily mean that the entire city has an interest in remaining a member. As Segers explains, there are actually two ‘Cities of London’, by which he means that only part of the City has an interest in complying with the various rules and standards set by the EU. The other part? Not so much…

Of course, you could still dismiss this as some rubbish Remainer conspiracy theory, based on little evidence. But actually, there is evidence and it may come from an unexpected source: Nigel Farage himself. In a 2016 interview with the Financial Times, he also distinguished between two Cities of London – interestingly mirroring Segers’ analysis. “There are two great different cities”, he said, one of which “can get along well with the European Union”. The other city is that of “the foreign exchange traders, the commodity traders, and many of those smaller independent companies”. His main point, he continued, was that “we in 2010 handed over regulatory control of financial services (…) to three EU institutions”. In other words, what Farage seems to care about most is not the national sovereignty of the UK, but the standards and regulations that banking, insurance, and financial equities had to comply with.

But still, I hear you say, Farage isn’t even in government, so how is this relevant? It is relevant because it shows how the financial giant that is the City of London has used its power to influence policy. In fact, Farage is not the only politician who has strong ties to the City and indeed an interest in Brexit. One such figure, as Segers explains, is Jacob Rees Mogg, the current Leader of the House of Commons and, not unimportantly, co-founder of the hedge fund Somerset Capital Management. Another example is Rishi Sunak, Chancellor of the Exchequer, who has close ties to another hedge fund called The Children’s Investment Fund Management. Both of these individuals are strong proponents of leaving the EU and now hold prominent positions in Boris Johnson’s cabinet. Incidentally, they also have an interest in reducing the regulation of financial services.

It is no wonder, then, that the trade agreement the UK Government struck with the EU on Christmas Eve of last year didn’t include any provisions on financial services. If it did, then the UK would have had to adhere to EU standards in order to freely trade with the bloc, as is now the case for trade in goods. So why was trade in financial services left out of the agreement? As always, the official reason given by the government is sovereignty. More likely, however, is that if the UK was indeed still bound by EU standards on financial services, it could not drive down regulation in this area. It would also mean that hedge funds would not be able to profit from such deregulation.

But that would mean … ? Yes, exactly. It means that the most ardent proponents of Brexit were those who stand to profit from it the most. Whilst ordinary people are faced with job losses, increased prices, and have their freedom to live, work, and study in the EU taken away from them, hedge fund managers and Brexiteer politicians are making millions. Essentially, the likes of Farage, Rees-Mogg, and without a doubt many others, have abused the tools of liberal democracy for personal profit. Of course, this is nothing new for this Conservative government. Their disastrous approach to tackling the pandemic has been characterised by the handing out contracts to people who just happened to have close ties with the Tory party, for which health secretary Matt Hancock was recently reprimanded by the High Court. If this were happening in some third-world country whose exact name and location everyone keeps forgetting, we would be referring to this with one simple word: corruption.