What is Brexit’s potential impact on financial services, businesses in Britain and the overall U.K. economy?
Former U.K. Prime Minister David Cameron answered these questions and more during his keynote presentation at the recent Schwab Impact conference in Chicago.
Cameron was prime minister of the United Kingdom from 2010 to 2016 – until he famously stepped down following the referendum vote in favor of leaving the European Union.
Cameron, who comes from a family of stockbrokers, sat for a Q&A session with Jeffrey Kleintop and audience.
“My father was a stockbroker, my grandfather was a stockbroker, my great-grandfather was a stockbroker,” Cameron told the audience. ‘What on earth are you doing in politics?’ It was a great disappointment that I didn’t follow the family tradition.”
Here are a few highlights from that Q&A session.
On stepping down:
“I genuinely believe we needed a new prime minister, and that’s why I stood down. It was immensely painful to make that decision,” Cameron said.
And he said that he thinks he was right to step down.
“I didn’t hold the referendum and say ‘Look, this is a big choice. On the one hand, here’s an argument. On the other hand, here’s another argument. You decide,’” he explained. “I held the referendum, and threw myself 100% into one side of the argument because I thought it was right.”
Having done that and having lost the referendum, Cameron said he would not have had the two “absolute essential things” that a prime minister needs.
“You’ve got to have a passion for what you’re doing, and I wouldn’t have been passionate about pursuing this new pathway,” he said. “And the second thing you’ve got to have, almost more important, is you’ve got to have real credibility. And I wouldn’t have that credibility because I threw myself so much into the other side of the argument.”
On the Brexit vote:
“I believe that Brexit will still go ahead, I still think it’s the wrong decision,” Cameron said. “I think it would have been better to stay in and fight, but I’m a democrat with a small d and I think you have to abide by what people have decided.”
Cameron said he thinks Britain will reach a deal with the European Union – a deal that is “mutually beneficial.”
On the U.K economy post-Brexit:
According to Cameron, “the British economy has been more resilient” than many may have expected.
Many economists and central bankers felt that after the Brexit vote, the U.K. economy would suffer tremendously. The Bank of England cut interest rates. Yet just recently they hiked rates, acknowledging that growth was very resilient.
According to Cameron, the action the Bank of England took in cutting interest rates likely “helped to avoid a worse situation.”
“I think what we see now is that we are still growing – that’s positive. Unemployment is still falling, which is positive,” Cameron explained.
But, he added that Britain is not growing as fast as it “should be or could be.”
“If you look across Europe, there is something of a recovery in the European economies taking place. And we need Britain to be at the forefront of that,” he said. “I think there’s a little bit of a holdback.”
According to Cameron, Britain’s problem is going to be that “nothing will be quite as good as the absolute full-access to the single market” that you have as a member of the EU.
“That’s going to be our challenge,” he said.
On businesses response to Brexit:
Britain, as a leader in financial services, benefits from being a part of the European Union single market, according to Cameron.
“But the truth is, the city of London is … a major financial center – like New York, like Shanghai – and I think the banks and companies invested there, they want to stay,” Cameron said. “And so they’re looking at ways to try and make sure they maximize their investment in London. We need to help them do that.”
For other companies, a lot of companies don’t export and it doesn’t affect them.
“For the big sectors – automotive, agriculture and others – we’ve got to deliver the best possible market access for them,” he added.
On the possibility of a revote:
Cameron thinks there’s no prospect of a second referendum – unless there is a really big change in public opinion (“I don’t think we’ve seen that yet in the U.K.,” he added), or if Parliament decided to block the treaty that comes out between Britain and the European Union.
“If either of those two things happened – big change in public opinion, Parliament taking a different view – then maybe the circumstances would be there (for a re-vote), but I don’t see that happening,” he said.
Cameron said there is an “80% chance” that Brexit will go ahead on the basis of a deal between Britain and Europe.
“I think you’re seeing the outlines of that deal now,” he added. “You’re seeing the idea of a two-year transition where we effectively behave as if we’re still in the European Union … and I think that gives people more certainty.”
Britain wants London to go on being a “great financial center,” and Cameron said that transition will help. “That will give us time to find a deal,” he said. “Now I hope, in that final deal, that we stay as close to the European Union as we can.”
— Related on ThinkAdvisor: