Brexit, the City and the Contingent Power of Finance

Brexit poses a profound challenge to the economic fortunes of the financial services sector in the United Kingdom (UK) because it threatens to sever access to the single market in the European Union (EU). Recognising this, the City of London’s largest financial firms and main representative bodies supported a Remain vote in the June 2016 referendum, and subsequently lobbied for a ‘soft’ Brexit policy to preserve the City’s lucrative passporting rights. Despite this, the government led by Theresa May pursued a ‘hard’ Brexit policy which threatened to leave the UK outside the single market. How can we explain the City’s apparent failure to influence the UK’s Brexit policy? We argue that whilst the UK financial sector wielded formidable latent structural power, its capacity to translate this into instrumental influence in the policy process was constrained by three factors: the political statecraft of Brexit, leading the government to downgrade the concerns of the financial industry; the reconfiguration of institutional structures, which undermined the City’s voice within government; and constraints on business organisation, caused by collective action problems and heterogeneous preferences. These three factors constitute important scope conditions which highlight the contingent power of finance in liberal market economies.