Nicky Morgan discusses financial stability and Brexit at Saranac breakfast event

Nicky Morgan discusses financial stability and Brexit at Saranac breakfast event

In mid-December, clients and friends of Saranac Partners gathered for an informal breakfast with the Right Honourable Nicky Morgan MP.

Nicky Morgan, the Chair of the Treasury Select Committee, had been due to share her insight into the UK’s financial stability, and while she did speak about her work with the Committee in scrutinising the work the Bank of England does to stress test the UK’s banks, the focus of the conversation over breakfast was somewhat overtaken by the events of the preceding evening.

With the 48 votes needed to force a vote of no confidence in the UK’s Prime Minister having been reached overnight, Nicky Morgan was able to provide an insider’s view of how this development might unfold and its ramifications, both for the Brexit process and for markets.

The Treasury Select Committee and Financial Stability

The Treasury Select Committee, which works closely with the industry to understand and address key issues, is currently focused on issues such as access to financial services by vulnerable consumers, funding for SMEs alongside financial stability.

It requested that the Treasury, the Bank of England and the Financial Conduct Authority should produce their analysis of different scenarios post-Brexit and their effect on financial stability and financial services. Lending to businesses is likely to slow, hitting the broader economy

Brexit and the economy

The Government’s bandwidth is now largely Brexit bandwidth, meaning that building momentum for any project that doesn’t pertain to the Brexit process is currently a secondary priority.

  • Conditions for a grand coalition may emerge as party factions deepen, on both sides of the aisle
  • European Union is committed to working within an existing model, e.g. Norway model or Canada Free Trade Agreement although the draft Withdrawal Agreement goes beyond any such existing model
  • There are no easy answers with a divided country

The European Union and the Brexit process

The EU itself is a source of uncertainty in the finalisation of the Brexit process, with pressure arising both from the federal and the member state level.

  • Any extension to Article 50 would need to be approved by all 27 member states
  • There are European Parliament elections next year, which means there will be no new Commission appointed until later in 2019
  • Therefore there is an additional time pressure to finalise a deal as soon as possible

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