ROYAL Bank of Scotland (RBS) chairman Sir Howard Davies yesterday told a gathering at the Swiss-based Financial Stability Institute that the UK Government has failed to address concerns about post-Brexit financial stability because it has been prioritising other areas of the economy.

Speaking at the organisation’s 20th anniversary conference in Basel, Sir Howard, who previously served as deputy governor of the Bank of England and chairman of the Financial Services Authority, noted that “financial services, and financial stability, have not been as prominent in the painful debates surrounding Brexit as they might have been”.

“Our Government has prioritised other areas of the economy so it is hard to know what new arrangements will emerge to manage the complex interactions between London’s markets and the rest of Europe [after Brexit],” he said.

Though he noted that the Bank of England expects the risk of major disruption to financial stability to be relatively low even in the event of a disorderly Brexit, Sir Howard said that in the longer term “without deep and comprehensive co-operation between the UK and the 27 [EU member states], there is a risk that we turn inwards towards closed markets”.

The outcome of that, he said, would be a reduction in cross-border investment and fragmentation of liquidity that would lead to “higher costs of financing for households and business, less reliable access to finance and less resilient finance”.

“It is clear that the ambition to develop a fully fledged capital markets union in Europe has suffered a setback, as a result of a popular vote in which the merits of open capital markets did not figure in the debate - and where the campaign revealed that arguments based on those assumptions, widely shared in the financial community and among economists, had no resonance at all,” he added.

“Warnings by the central bank and others were characterised as ‘Project Fear’ designed to distort the democratic will. More recently, when Governor [Mark] Carney produced some carefully worded comments warning against a disorderly Brexit, the chef de file of the hard brexiteers Jacob Rees-Mogg characterised him as ‘a second tier Canadian politician’ and dismissed his arguments out of hand.

“In the not too distant past a senior spokesperson, of whichever party, would not have criticised a central banker in that way; he or she would have had more respect for the bank’s independence, and recognised that ad hominem attacks could damage the credibility of the institution, from which we would all suffer.”

Meanwhile, speaking on LBC radio show Nick Ferrari at Breakfast, RBS chief executive Ross McEwan yesterday noted the long-term damage the protracted Brexit negotiations are likely to do to the UK economy.

“I’ll just give you one stat - business investment last year was down 3.7 per cent [and] that flows into an economy over time,” he said.

“We need to get it sorted so we can all move on - I think that’s what your listeners are saying to you, and that’s certainly what’s coming through from a business perspective.

“We’ve been out talking to our customers [and] what’s really interesting is the larger corporates have slowed down their investment - they’ve just stopped and said, let’s just get some certainty.”