So just when, exactly, will the City press the no-deal panic button? | Nils Pratley | Business

At what point do financial markets start to panic about the risk of a no-deal Brexit? In theory, you’d think it would be about now. We have, after all, just witnessed the strange spectacle of the prime minister abandoning her own Brexit deal to go back to Brussels to try to secure changes to the Irish backstop, something the European Union has said, time and again, it will not contemplate. Meanwhile, the clock ticks and the default position remains that the UK leaves the EU on 29 March.

The pound, it’s true, had a minor wobble on Tuesday evening when MPs voted against Yvette Cooper’s amendment (the one to prevent a no-deal by extending the article 50 negotiating period) but you’d barely notice it on a chart extending over several days. Sterling stands at almost $1.31 against the US dollar, a couple of cents higher than it was on 1 January.

A few City strategists attempted to pluck some cheerful titbits from the latest confusion. A belated show of unity in the Tory party reduces the chances of an early election, ran one line of argument, ignoring the fact that the cosiness won’t last if May returns empty-handed. Or perhaps, said others, it’s positive that the government now has an agreed negotiating position, even if that position could collapse within a fortnight after an encounter with EU negotiators.

You get the picture: the market continues to ascribe a low probability to a no-deal Brexit. Most strategists at big banks put the odds at less than 20% and think Tuesday’s votes didn’t shift the big picture. One reckoned investors would only start to fret seriously if the outcome remains foggy at the end of February.

This relaxed tone (relatively speaking) may yet turn out to be justified by events since, as many have said, eleventh-hour brinkmanship is always a possible plotline when negotiating with the EU. Yet the air of complacency in markets is extraordinary. Even a one-fifth chance should be alarming at this late stage.

Grant Thornton’s ‘don’t blame us, guv’ defence takes the biscuit

If you naively thought auditors look for frauds when inspecting a company’s accounts, the chief executive of Grant Thornton has news for you. David Dunckley says that’s not their job. “We’re not looking for fraud, we’re not looking at the future, we’re not giving a statement that the accounts are correct,” he told a flabbergasted committee of MPs.

Even Dunckley’s fellow witnesses from the auditing world struggled with his testimony. They agreed an audit process is not set up specifically to spot a fraud but they accepted it is entirely reasonable to expect an audit firm to uncover financial wrongdoing that is big enough to cause a company to collapse.

The elephant in the room was, of course, Patisserie Valerie, whose accounts were audited by, yes, Grant Thornton before the £40m black hole was uncovered. Dunckley couldn’t talk about Patisserie, he stressed time and again, but it was impossible to view his remarks as anything other than a “don’t blame us, guv” defence. There is an “expectation gap”, he continued – the outside world has an over-inflated impression of what audits do.

Come on. The tale emerging at Patisserie Valerie appears to be one of bounced cheques for multi-million sums being used to inflate the company’s cash position at year-end. Maybe such behaviour falls within Dunckley’s definition of “sophisticated” fraud, but committee chair Rachel Reeves’s reply was on the money: Patisserie Valerie wasn’t a complex multinational, it was a chain of cake shops.

We must, of course, await the various regulators’ post-mortems before passing definitive judgment on the quality of the audit work at Patisserie Valerie. In the meantime, though, Grant Thornton would be well advised not to dispatch Dunckley to pitch for business. By the time he’d finished explaining the limits of auditors’ responsibilities, it was harder than ever to understand how his industry can justify its fat fees.

Time to call these endless meetings to order?

“As an industry we have far too many meetings,” says Andy Griffiths, director of the Investor Forum, the body that lobbies collectively on behalf of institutional investors. Exhibit A would be Unilever, which held 200 meetings with fund managers before realising that it would not be able to shove through its plan to move the head office to the Netherlands.

Or try tobacco firm Imperial Brands, which apparently held 500 investor meetings in a year but left fund managers so frustrated that they summoned the Forum to put their concerns to the board. Yes, that’s right – 500 meetings. Is the investor-relations industry out of control?

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