Investec held its annual broker conference on 6 October at the Hilton Hotel on Deansgate, Manchester. While the theme was ‘leadership’, as a nod to the bank’s ten years in operation, questions over the UK’s impending withdrawal from the EU loomed heavy over the occasion.
In his opening remarks, Andy Hart, head of asset finance at Investec, warned of Brexit-related uncertainty, and the need to be prepared.
“There is a lot of turmoil in markets at the moment and there is also a lot of uncertainty. What we need to all think about, as leaders of our businesses, are the things we can do which will give us competitive advantage moving forward.
“I genuinely believe it is the businesses that are thinking about leadership most effectively that are going to be the ones that do well over the next three or four years, no matter what happens with Brexit.
“We will share our thoughts with you during this conference about how we envisage things panning out over the next few years.”
Wesley Harfield, head of sales at Investec Asset Finance gave a business update, stating that lending had risen 27% and Investec had added eleven broker relationships.
Harfield also said there had been 46% growth in exposures above £500,000 (€553,750) and 25% growth in exposures greater than £1m over the past year.
He also announced that Investec sought to grow its market share in hard assets from 6%. Investec’s share in soft assets was 15%, a market which Harfield stated was around a third of the size of the hard asset market.
“We want to grow our market share in soft assets, which represent the largest segment of our business but also, in particular, the harder asset market where we currently punch below our weight.
“We are not afraid of larger tickets and or more complex structures and have increased exposures over £500k significantly.”
Paul Cunningham, head of Quantum Funding, provided an update on the SME-focused subsidiary, before Philip Shaw, chief economist at Investec, brought the topic back to Brexit.
In a segment called Where now for the Brexit process? Shaw discussed trade and financial services with the EU in a post-Brexit UK.
“Clearly there is a lot to be settled in terms of the exit process and post-exit arrangement. In terms of the economy the most important thing is trade access,” Shaw said.
“At the moment, being an EU member means the UK is in the single market [which] gives tariff-free access of exports of goods, the passporting of financial services into any other EU country, [and] it means goods do not need customs checks.”
Shaw brought examples from non-EU countries to highlight the time it had taken to develop free trade deals, saying: “Trying to get things wrapped up with the EU within two years is ambitious to say the least.”
He also stated that while the fall in the value of the pound versus the dollar and euro proved positive for exporters, it impacted importers negatively, and would likely lead to a rise in inflation, “eroding the real spending power of the average household,” and thereby reduced consumer spending.
However, Shaw said recession was likely to be avoided due to the cut in the Bank of England base rate to 0.25%, and anticipated a further cut.
Following Shaw, Conservative MP Andrew Mitchell spoke to the attendants about Brexit.
“There is no map,” Mitchell warned speaking of Brexit. “We have got on a train to a destination we don’t know, and we don’t know what the route is.”
However, Mitchell voiced optimism of a “good deal” being struck between the UK and the EU, adding: “The City of London, Britain’s financial leadership will continue.”
The former investment banker addressed concerns over the future of the passporting of financial services by stating his belief that a solution could be reached based on where financial products were regulated.
“As far as financial regulation is concerned, I think there is a sensible way through this which will not fetter or damage London.
“It’s based on the fact that if you are regulated in London the regulator is recognised, and that continues the passporting structure throughout Europe.”
Mitchell also mentioned concerns over financial services jobs leaving London, saying a system of relevant work permits could be provided to EU citizens once Brexit occurred.
“In the end,” Mitchell concluded, “a sensible deal will be done, and Brexit will work – but it’s going to be quite a tight ride.”
Following the presentation, Mitchell was joined by Andy Hart, Wesley Harfield, and Philip Shaw for a Brexit-related question-and-answer session.
After preliminary questions about the US presidential election and hypothetical voting choices, the panellists turned to Brexit – particularly its effect on financial services.
Highlighting its importance to financial services, a member of the audience asked about financial passporting, and whether all 27 EU member states would have to agree on any deal that the UK may negotiate.
Mitchell reiterated his support for a regulation-related solution to the passporting question. Shaw used the example of the Channel Islands to explain how passporting may work without the UK having EU membership.
“I was in the Channel Islands last week, and they showed it is possible to gain passporting. Jersey has just acquired passporting status into the EU. It is possible to win that [regulatory] battle even if you’re starting from a position where you’re not equivalent,” he said.
Baroness Manningham-Buller, who was head of MI5 from 2002 until 2007, was among the invited speakers.
Such was the state of Brexit concerns that after an address and answering general questions, Manningham-Buller was asked what effect Brexit was likely to have on the UK’s national security.
“[The UK] will still be exchanging intelligence on a daily basis with our friends in Europe and working with them on cases,” Manningham-Buller said.
“But a number of things we will no longer have access to, which I think are going to be damaging. One of them is the European arrest warrant. There are hundreds of British criminals we’ve been able to retrieve through that– including quite a lot of terrorists – and we will no longer have access to it.”
Mark Douglas, head of sales, corporate and institutional treasury at Investec, concluded with a Brexit-related presentation, Approaching uncertainty with optimism, speaking mostly about the currency markets, and tying it into the conference’s leadership theme.
“Uncertainty gives great opportunity for businesses to lead,” Douglas said. Recalling the fall in the pound immediately following the Brexit vote, Douglas said some members of the Investec currency desk had a “24 hour stay-in”.
“We sensed an opportunity to lead in our industry,” he continued. “We did a whole run-up to Brexit to try and be there for our clients, providing them with information.
“In uncertain times, as well as opportunities for businesses to lead, if you’ve got the right culture it’s an opportunity for your people to step up,” Douglas said.