The City is waking up to a harsh Johnson reality that’s going to bite it and the rest of us

When it comes to the two prevailing views of Boris Johnson, the City convinced itself that the more benign one is true, that he really is the pragmatic One Nation-type Tory it got to know as London mayor and that he would revert back to this type if only he got his majority.

You can sort of understand it. It isn’t just in the Square Mile that people have been predicting a tack to the centre ground by a prime minister less reliant upon the extremists of the European Research Group.

Trouble with that assessment is that everything this man has said and done since entering parliament has demonstrated that Bad Boris – the hard right-wing populist; Trump with a thesaurus – is the real deal.

Then there are the people around him. Start with Dominic Cummings and the Vote Leave boys and girls who dominate the kitchen cabinet.

All this being the case, it really shouldn’t have come as any surprise that just a few days after promising to begin “the healing” we’re talking revolution in the civil service, we have a boycott of the BBC Today programme, despite its rightward inclinations, and now we’re going to see legislation to put a no-deal Brexit back on the table by time limiting the transition deal, under which the UK will be out of the union but in the single market and bound to its rules, to the end of the year.

The financial markets’ response was oh so predictable. The pound fell out of bed, surrendering its pre-election gains. UK-focused shares performed similarly. The shrewdies who got in on the vanishingly brief post-election “Boris bounce” had probably already taken the opportunity to bail out and pocket a nice profit before the bloodbath was under way.

The FTSE 100, largely made up of international businesses, was basically flat, but the FTSE 250 index of second tier, largely UK-focused companies, took a bath, losing nearly 300 points at its lowest ebb.

This despite the substantial discount in valuations UK equities have when compared to the rest of the world. Panmure’s Simon French expounded upon this in a series of tweets. The UK market, he noted, had entered the pre-election period at a 20 per cent discount to the rest of the world.

Look at domestic companies, however, and the discount was more like 35 per cent, having topped out at 50 per cent in July. This should be a boon for value seekers but when no deal was back in the mix, the roof fell in and investors ran for the exit. That tells its own story.

You can file all this under “reality bites”. Far from “getting Brexit done”, the thing is going to hang around trading floors like a bad smell for the best part of next year and perhaps beyond, with another cliff edge looming at the end of December 2020.

UK plc might be cushioned somewhat by a more expansionary fiscal policy than has been seen over more than a decade of Tory rule. But it remains to be seen whether this will be enough to help it out of the slow lane. There are, anyway, doubts about the chancellor Sajid Javid’s room for manoeuvre given that the Office for Budget Responsibility (OBR) has doubled its borrowing estimate for the next five years before the Tories spending promises are taken into account.

What price the OBR being wound up, I wonder. This government isn’t overly fond of those who tell inconvenient truths.

Javid hailed the latest official employment statistics, which showed the unemployment rate remaining at its lowest for 45 years, but look beyond the cheap slogans and the picture ain’t so pretty. Wage growth is slowing and the Institute of Directors warned that firms are cutting back on new hires.

Talking about unleashing “Britain’s potential” is fine and dandy, but how are you going to do that Mr Javid? Do you have even the faintest idea?

I suspect you don’t, so we’ll get a lot more of the cheap slogans in the months ahead. They look set to be rocky.

The CBI provided more evidence of that, reporting that manufacturing output volumes fell in the three months to December, and at the fastest pace since the financial crisis.

Remember that? We might be set for a repeat showing from an economic perspective. It isn’t just reality that’s biting the City. It’s going to bite the government, and it’s going to bite the rest of us. Hard. How long will people be prepared to put up with slogans then? Well that’s the big question, isn’t it.