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Digital Subscriptions > Prospect Magazine > December 2017 > WHEN THE BANKS LEAVE

WHEN THE BANKS LEAVE

MORE THAN A TENTH OF THE CITY’S BUSINESS IS NOW BOUND TO GO, BUT HOW MUCH WORSE COULD THINGS GET?

Just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I’ll be spending a lot more time there. #Brexit.” Thus tweeted Lloyd Blankfein, Chief Executive of Goldman Sachs, on 19th October. It was the first time a major American financial services firm had signalled a shift of its European operations away from London in this way: not as a decision conditional on future developments, but as an established fact of business life. It was the first, but presumably not the last.

It is too late to hope that the City of London, by many measures the world’s leading financial centre and an economic engine for both the UK and Europe, could emerge unscathed from Brexit. The City, which generates tens of billions of pounds each year in tax revenues, will suffer relative both to its competitors and to how it would have performed without Brexit and probably in absolute terms as well. Harm is now unavoidable. The UK is suffering from heightened risk and the vagaries of its politics since the Brexit vote, including the unexpected outcome of this year’s election, have reinforced that perception. There is no status quo scenario: even if the UK was somehow to remain in the European Union after all, that would be disruptive too.

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In Prospect’s December issue: Adam Posen, Diane Coyle and Nicolas Véron examine the state of Britain’s economy with Brexit looming and suggest that with a large part of the City looking to move and with productivity remaining low the outlook is firmly negative. Posen suggests that the only thing capable of disciplining the Brexit economy is the reality that things are going to be worse. Coyle suggest that although Brexit will hamper Britain’s productivity, the problem is long-term. Véron argues that more than a tenth of the City’s business will disappear due to Brexit—a significant slice that will be difficult to cover off. Elsewhere in the issue: Steve Bloomfield uncovers what is going on at Dfid, the struggling government department that recently lost its Secretary of State. Nick Cohen looks at the rise of the Strong Man is Eastern Europe as Viktor Orbán clamps down on society and Lizzie Porter reports from Erbil in Iraqi Kurdistan, a region plagued by war and political instability.