City reaction to EU referendum split

“This is a political decision. This is not an economic decision."

Business reaction to Cameron's decision to give Britons a referendum on Europe today was split: some worried about economic uncertainty while others welcomed the opportunity to renegotiate trading terms.

Sir Martin Sorrell, chief executive of advertising group WPP:

Having a referendum creates more uncertainty and we don’t need that.

This is a political decision. This is not an economic decision. This isn’t good news. You added another reason why people will postpone investment decisions.

British Chambers of Commerce director general John Longworth:

Announcing plans for a referendum on British membership puts the onus on the rest of Europe to take the Prime Minister seriously, as they will now see that he is prepared to walk away from the table.

[But] the lengthy timescale for negotiation and referendum must be shortened, with the aim of securing a cross-party consensus and the outline of a deal during this Parliament.

John Cridland, CBI Director-General:

The EU single market is fundamental to Britain’s future economic success, but the closer union of the Eurozone is not for us.

The Prime Minister rightly recognises the benefits of retaining membership of what must be a reformed EU and the CBI will work closely with government to get the best deal for Britain.

Peter Sands, chief executive of Standard Chartered bank:

The UK needs to remain very much part of the EU, but I can completely understand why prime minister Cameron thought it necessary to offer the people a referendum” 

Europe is changing and as the biggest country in Europe outside the eurozone, its relationship is going to change.

Mark Boleat, policy chairman at The City of London Corporation:

London’s position as Europe’s leading international financial and business centre is crucial to sustaining jobs and growth not just in the UK but across the continent.

Simon Walker, director general of the Institute of Directors:

A future referendum to decide the workings of our relationship is the best way to affirm Britain's participation in a free-market Europe which is competitive and deregulated.

City split on referendum. Photograph: Getty Images
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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.