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You can find the current article at its original source at http://www.theguardian.com/business/nils-pratley-on-finance/2016/jan/21/jp-morgan-threat-to-leave-uk-brexit-may-bolster-support-to-quit-eu
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| JP Morgan's threat to leave if UK quits EU may bolster support for Brexit | JP Morgan's threat to leave if UK quits EU may bolster support for Brexit |
| (about 1 hour later) | |
| Here comes Wall Street, answering David Cameron’s call for the voice of business to be “heard in Britain and across the whole continent”. Jamie Dimon, the chairman and chief executive of JP Morgan, suggests his bank would quit the UK if Britain exits the European Union. “Britain’s been a great home for financial companies and it’s benefited London quite a bit. We’d like to stay there but if we can’t, we can’t,” he said. | Here comes Wall Street, answering David Cameron’s call for the voice of business to be “heard in Britain and across the whole continent”. Jamie Dimon, the chairman and chief executive of JP Morgan, suggests his bank would quit the UK if Britain exits the European Union. “Britain’s been a great home for financial companies and it’s benefited London quite a bit. We’d like to stay there but if we can’t, we can’t,” he said. |
| “Can we have that in writing?” some UK voters may respond. Overpaid investment bankers, especially Wall Street types, are not held in high general esteem in the UK. Vague threats to leave the country will be viewed in many quarters as arrogant and may well be counterproductive for the Remain camp. | |
| If Dimon really wants to contribute to the debate – as opposed to throwing out one-liners – he should study how UK financial institutions behaved during the Scottish referendum. The likes of Standard Life and Royal Bank of Scotland avoided ambiguity and instead described the changes they would make to their businesses if voters chose independence. In RBS’s case, its actions would have amounted to little more than taking the registered office south of the border without moving jobs and operations. | If Dimon really wants to contribute to the debate – as opposed to throwing out one-liners – he should study how UK financial institutions behaved during the Scottish referendum. The likes of Standard Life and Royal Bank of Scotland avoided ambiguity and instead described the changes they would make to their businesses if voters chose independence. In RBS’s case, its actions would have amounted to little more than taking the registered office south of the border without moving jobs and operations. |
| Is Dimon saying JP Morgan’s departure from the UK would be automatic, with 19,000 jobs moving to Paris, Frankfurt or wherever? Would the bank make its decision only after seeing the terms of a negotiated exit? Or would it hedge its bets in case, as some argue, the City overcomes any short-term loss of business with the EU by expanding trade with emerging markets? There are big differences between the three positions. If JP Morgan has conducted a proper analysis of its options, let’s hear the details rather than airy soundbites. | Is Dimon saying JP Morgan’s departure from the UK would be automatic, with 19,000 jobs moving to Paris, Frankfurt or wherever? Would the bank make its decision only after seeing the terms of a negotiated exit? Or would it hedge its bets in case, as some argue, the City overcomes any short-term loss of business with the EU by expanding trade with emerging markets? There are big differences between the three positions. If JP Morgan has conducted a proper analysis of its options, let’s hear the details rather than airy soundbites. |
| The same applies to other companies. Chief executives are entitled to give their personal opinions on EU membership, but the interesting material – and the stuff that may sway opinions – is what Brexit would mean for how companies are managed and where they would invest. That needs to be supported by robust analysis. | The same applies to other companies. Chief executives are entitled to give their personal opinions on EU membership, but the interesting material – and the stuff that may sway opinions – is what Brexit would mean for how companies are managed and where they would invest. That needs to be supported by robust analysis. |
| Shareholders, too, deserve more than glib remarks. If the EU referendum poses the most important question the UK will answer for a generation, it would be useful to know which boards have plans to deal with the potential direct consequences for their companies. “We’re off, maybe,” doesn’t do the job. | Shareholders, too, deserve more than glib remarks. If the EU referendum poses the most important question the UK will answer for a generation, it would be useful to know which boards have plans to deal with the potential direct consequences for their companies. “We’re off, maybe,” doesn’t do the job. |
| Grim reading for Pearson | Grim reading for Pearson |
| Two years ago, John Fallon, Pearson’s chief executive, said the educational publisher was in the middle of “a short but difficult transition”. Short has become long and difficult has become very difficult. About 4,000 jobs, 10% of the workforce, will be axed, creating a £320m restructuring bill. | Two years ago, John Fallon, Pearson’s chief executive, said the educational publisher was in the middle of “a short but difficult transition”. Short has become long and difficult has become very difficult. About 4,000 jobs, 10% of the workforce, will be axed, creating a £320m restructuring bill. |
| Was Fallon just too timid the first time? The way he tells it, certain “cyclical” factors have lasted longer than expected and thus more is required. But don’t worry, this time Pearson really is confident that its markets will come good. Fifty years of data, apparently, show that when US employment stabilises, enrolments in colleges rise at 1%-1.5% a year, which in theory will generate extra demand for Pearson’s textbooks and learning materials. | Was Fallon just too timid the first time? The way he tells it, certain “cyclical” factors have lasted longer than expected and thus more is required. But don’t worry, this time Pearson really is confident that its markets will come good. Fifty years of data, apparently, show that when US employment stabilises, enrolments in colleges rise at 1%-1.5% a year, which in theory will generate extra demand for Pearson’s textbooks and learning materials. |
| Throw in the restructuring savings of £350m and Pearson will be making £800m of operating profits by 2018, versus £600m-ish expected for this year, Fallon says. While shareholders await those sunny uplands, they can enjoy a steady dividend of 52p even though it would barely be covered by pre-restructuring earnings this year, even if things go well. The cushion is the proceeds from selling the Financial Times and the 50% stake in the Economist. That’s the theory, and the markets lapped it up – shares rose by 17%. | |
| The celebration looks highly premature. When managements grumble that cycles are taking longer to turn than they expected, it often means their markets have changed permanently for the worse. Maybe US states are finding ways to squeeze their education budgets harder; maybe, in the digital age, students prefer to rent vital textbooks and won’t pay the old prices. | The celebration looks highly premature. When managements grumble that cycles are taking longer to turn than they expected, it often means their markets have changed permanently for the worse. Maybe US states are finding ways to squeeze their education budgets harder; maybe, in the digital age, students prefer to rent vital textbooks and won’t pay the old prices. |
| You can’t blame Fallon for adopting a one-last-heave approach, but the evidence of the past two years suggests Pearson’s markets can change faster than the company. That dividend, offering a 6.7% yield, doesn’t look safe yet. | You can’t blame Fallon for adopting a one-last-heave approach, but the evidence of the past two years suggests Pearson’s markets can change faster than the company. That dividend, offering a 6.7% yield, doesn’t look safe yet. |
| Another look at HBOS | Another look at HBOS |
| “This is not before time,” said Andrew Tyrie, the chair of the Treasury select committee, dryly. You bet. Seven years after the collapse of HBOS, the Financial Reporting Council will take a look at KPMG’s audit of the failed bank’s accounts for 2007, specifically the use of “going concern” provisions. | “This is not before time,” said Andrew Tyrie, the chair of the Treasury select committee, dryly. You bet. Seven years after the collapse of HBOS, the Financial Reporting Council will take a look at KPMG’s audit of the failed bank’s accounts for 2007, specifically the use of “going concern” provisions. |
| This is only a preliminary investigation, but thank heavens something is happening. The FRC resents suggestions of foot-dragging, arguing that new material in the official regulatory report on HBOS, published in November, has prompted the fresh look. Well, OK, but November was two months ago, and Tyrie and others have been screaming for the FRC to wake up ever since. Get a move on, chaps. | This is only a preliminary investigation, but thank heavens something is happening. The FRC resents suggestions of foot-dragging, arguing that new material in the official regulatory report on HBOS, published in November, has prompted the fresh look. Well, OK, but November was two months ago, and Tyrie and others have been screaming for the FRC to wake up ever since. Get a move on, chaps. |
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