UK finance chief warns of no-deal Brexit ‘catastrophe’ for banking industry

A no-deal Brexit would create a “1930s-style contraction” according to the head of UK Finance, which represents banks and financial services.

In an exclusive interview, Stephen Jones told Channel 4 News that:

• Crashing out of the EU would be a “catastrophe” for the banking industry
• There would be huge problems for small businesses getting loans
• Mortgage and car finance markets would likely seize up
• There is a real risk of no-deal happening by accident

Asked what he was most worried about, Mr Jones said: “A no-deal Brexit on 29 March, where we crash out of European Union, is a catastrophe. It’s a social catastrophe, it’s an economic catastrophe. And by implication it is a catastrophe for the industry I represent, the banking industry.

“This is about jobs, this is about people not being able to pay their mortgages, not being able to pay back their loans, and that’s really bad news and it’s an outcome we can avoid.”

“It is a credit crunch of types,” he added.

“I don’t wish to be labelled a doom-monger – and our industry’s job is to cope with whatever circumstances are thrown at us, as best we can – but If our economy contracts by ten per cent, that’s 1930s style contraction. That is a massive increase in credit card losses, mortgage losses, vehicle loan losses.”

“I am worried about this happening if we crash out without a deal,” he said. “I think there is a real risk of no-deal happening by accident … if the prime minister’s deal is voted down, we are in totally uncharted territory.”

The UK Finance boss said he backs “a solution that avoids a No Deal Brexit,” but he admitted Theresa May’s deal is “not a great deal”.

“There’s an awful lot of money being paid for a political declaration, which quite frankly is not worth the paper it is written on,” he said.

Asked if Brexit has diminished London’s position in the world, Mr Jones said: “Yes, it will be diminished in my view.”

“I think regrettably it has, particularly in a European context. London as the European financial centre appears to most us to be – frankly – quietly – over. We’ll do our best to retain what we can, within the context of what’s negotiated, no-deal or a deal. But Frankfurt and Paris will become much more important financial centres in a European context.”

He also said the banking industry could do more to bridge social divides, saying: “There’s no question that the social costs of austerity and frankly the lack of benefit for the so-called boom times leading up to the credit crisis accruing to London and the South East are a real factor that has driven Brexit and something that we as a country and perhaps we as industry need to try and help heal.

“There’s no question in my mind that the psyche of we’re not being listened to by those Londoners and that the benefit of the boom economy in London hasn’t accrued to the rest of the country is something that has fed through to the Brexit vote.”