Jamie Dimon has given Andy Burnham's government of the day both a vote of confidence and a warning. The chief executive of JP Morgan says he wants London to remain the home of US banking “for a long time”, but whether Britain remains attractive as a place to do business depends on the new prime minister and his chancellor's revival of growth.
“The new chancellor [is] you will need good policies that create growth. So I pray that they get the policy right [as] government after government has made a mistake,” said Dimon, who has been in charge of the bank since 2006, in an interview with The Master Investor Podcast with Wilfred Frost, released on Tuesday.
For the owners of small and medium-sized British firms, that is a question of time posed with unusual bluntness. When the boss of America's largest bank says he has become a prayer, small businesses waiting for similar policy decisions may be similarly forgiven.
Burnham officially replaced Sir Keir Starmer on Monday, promising a “new political and economic model” for Britain and saying MPs had failed for decades to create the conditions for sustainable growth and equality. He enters Downing Street with eight out of ten SME owners prepared for the impact, so Dimon's cautious optimism will be closely read on both sides of that divide.
The man charged with answering Dimon's prayer is John Healey, who was elected at number 11 after early favorites Ed Miliband and Shabana Mahmood lost. Burnham also promised to put in place measures to reduce the cost of living as soon as possible on Tuesday, and revealed that he would raise the income threshold when workers start paying income tax, which is frozen at £12,570 from 2021.
Arithmetic does not forgive. Burnham has repeatedly committed to existing fiscal rules, funding daily spending from tax revenue over three years, but economists warn that the war in the Middle East may have changed his treasury from £23.7 billion to just £10 billion. All gifts must be paid for, and the City knows where the chancellors tend to look.
That's why Dimon reserved his harsh words for the bank tax, a balance sheet tax introduced after the global financial crisis. “I always thought it was wrong,” he said. “JP Morgan didn't hurt the UK … we're a good citizen there. We hire people there. We want to be big there. We train people there. We hire veterans there.”
“It's 17 years later. Is that fair to the shareholder? I mean, it might sound good, a 'tax on the banks', but my shareholders are paying $5 billion in that extra tax. And I think things like that have negative consequences.”
Asked if the tax hike would sink the bank's planned £3 billion UK headquarters, as it has already threatened to reconsider the Canary Wharf project if Britain mistreats the banks, Dimon was more measured: “I don't know what to do. I'm not going to make a decision like this.”
That is very important beyond the Square Mile. The £3 billion construction project caters to contractors, fit-out firms, suppliers and suppliers across the SME economy, and the tax treatment of Britain's biggest inward investors sets the tone for everyone considering whether they want to make money here.
There was warmth even for the dead. Rachel Reeves, who was fired by Burnham this week after two years at Treasury, “did a great job”, Dimon said. Investors attribute his financial prudence to keeping a lid on government borrowing costs.
His successor inherits goodwill, £10 billion of headroom, and one of Wall Street's most powerful men praying he doesn't squander it.
