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NatWest’s Sir Howard Davies: ‘I’m quite pessimistic. Brexit was a significant mistake’

Sir Howard Davies is a worried man. He is worried about political polarisation. He is worried about the long-term impact of Brexit on the City of London. And he is worried by the pushback against globalisation.

One thing he is not especially worried about is the health of the bank he chairs, NatWest, which in its former guise as Royal Bank of Scotland was on the edge of collapse during the global financial crisis of 2008.

Davies has been chair of NatWest for seven years and the turning point in the bank’s fortunes, he says, was paying a $4.9bn (£3.6bn) fine to the US authorities in 2018 for its role in the sub-prime mortgage crisis. Until that point, NatWest had been “scrambling behind the sofa” to find capital, but now it is in better financial shape than many comparable European banks and has been able to expand. It has, he says, been “a game of two halves”.

The footballing metaphor is telling because Davies has another concern. As a lifelong Manchester City fan, he fears his side will be pipped to the Premier League title by Liverpool in Sunday’s last round of matches. To mitigate the


Age 71

Family Married to a lapsed journalist. Two sons, one left, one right.

Education Bowker Vale primary; Manchester grammar school; Memorial University of Newfoundland; Merton College, Oxford; Stanford business school.

Pay “The usual answers are ‘enough’ or ‘no comment’, but £750,000 is published in NatWest’s accounts.”

Last holiday Cycling along a section of the Rhine path. “One day I will complete it.”

Best advice he’s been given “Always show you could do your boss’s job if required.”

Biggest career mistake “Agreeing to be director of the LSE. It ended in tears.”

Word he overuses “Guardiola, as in ‘we’ve got Guardiola’, sung to the tune of Glad All Over.”

How he relaxes Playing cricket, and listening to pianist Brad Mehldau: “Not usually at the same time.”

potential agony, he has staked £100 at 8-1 on Liverpool adding the title and the Champions League to the FA and Carabao cups they have already won.

It’s an “emotional hedge”, he admits, as he discusses a career spanning half a century in which he has worked at the Foreign Office, the Treasury and the Bank of England, and been Britain’s top financial regulator, director general of the CBI, a management consultant, and the head of the inquiry into UK airport capacity.

Asked which of his many jobs he has enjoyed the most, he picks none of the above but plumps for running the Audit Commission (subsequently scrapped by David Cameron’s government), which looked into whether local authorities were providing value for money.

“It was a riveting job. I found you could make significant improvements to local services, where the variations were absolutely enormous. It was really interesting and rewarding, and you could actually see you were making a difference.”

Far less enjoyable was the end of Davies’s stint as director of the London School of Economics after concerns were raised about the school’s decision to accept funding from a foundation controlled by the son of Muammar Gaddafi.

Davies says he never asked for money himself and thought there was something not quite right about the arrangement, but accepts that he should have spotted the potential for trouble. “There is no doubt I made a mistake. I should have stopped it and I didn’t.”

His latest project is a book – The Chancellors, published by Polity Press – about the Treasury’s role in the running of the economy under every chancellor from Gordon Brown to Rishi Sunak.

Davies was made head of the Financial Services Authority by Brown when supervision was hived off from the newly independent Bank of England in 1997, and he later faced criticism for failing to clamp down heavily enough on the City during the buildup to the crash of 2008. “At the time, people moaned about financial regulation being too tight and that I was judge and jury in my own court,” he says. “I was accused of being an overmighty regulator who was getting in the way of ‘animal spirits’. There was never any criticism in the other direction.”

Asked which of the recent chancellors he has most time for, Davies picks Alistair Darling, whose three years at the Treasury between 2007 and 2010 were dominated by the banking crash.

“Alistair had terrible hand to play. He had no money, a financial crisis and his predecessor as his boss. There wasn’t anything Alistair knew that Gordon didn’t. Yet he was completely unflappable.”

When he started writing the book, Davies was convinced he would conclude that the Treasury should be broken up into separate finance and economic departments, the model preferred by most other European countries. He has since changed his mind. “A bit of check and balance in our system is a very good idea,” he says. “If we divided responsibilities and had a department of economic affairs and a ministry for the budget, they would separately be less powerful than the Treasury is together and that would give No 10 free rein. That would be a mistake.

“This prime minister hated the Treasury partly because of its pro-EU views, or perceived pro-EU views, and role in the referendum. But when he got himself in a hole, who else but the Treasury could bail him out?”

If Davies is upbeat about the prospects for NatWest, he is less positive about what the future has in store for the UK. “I am quite pessimistic actually. Brexit was a significant mistake. You don’t solve the problems of the left-behind by damaging the one area of the country that’s been writing the cheques. London is paying large amounts of tax and will be damaged by Brexit over time.

“I worry about political polarisation. The same thing is happening in France [Davies teaches in Paris] and in the US. It is possibly less bad here than in the US or France, but I sense a kind of bitterness in public life which doesn’t create a good environment for rational solutions to problems.”

Davies says that when he first came to London from Manchester in the 1970s the capital was “gloomy” and “monochrome”, yet subsequently became a vibrant, multi-racial city. He fears the pendulum could now be swinging in the other direction. “China is separating from the US and there is this war [in Ukraine]. London has been the beneficiary of globalisation and if it goes into reverse, maybe the global city is past its peak.”


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