Financial Services City of London.
What happens to the city of London and the Financial Services sector post Brexit?
My guess not a lot, and I am not saying that just tongue in cheek. For years the city of London have been envied from across the European Union no more so than from the French establishment. This antipathy towards the city gathered pace after the introduction of the Euro.
For the European commission to rely on the city of London to clear euro denominated assets was simply an anathema, wrong. You will hear and read quotes in regard to “what country would allow a third party to clear their Euro trades” mostly from the French Finance Ministry. As I said in a recent post they are somewhat deluded as almost every jurisdiction including the US allow other centres across the world to trade their currency. So why do they make such claims? My guess the reason lays with a French school boy plan as a recent article in a national newspaper claims. Read this headline:
“The memo was written after the City of London’s Brexit envoy – former Home Office Minister Jeremy Browne – held talks in Paris earlier this month at the French finance ministry, state-owned Banque de France, the French Senate and the British Embassy. He met banking chiefs, senior politicians and diplomats.
Their message to UK Treasury Ministers and MPs says: “Macron’s France has effectively declared open war on London’s Square Mile”. And he warns starkly: “They are crystal clear about their underlying objective: the weakening of Britain, the on-going degradation of the City of London.”
Whilst this article was written post referendum its claims are nothing new, this desire has existed and been felt for many years, hence the term “ongoing degradation”.
Given this backdrop, why do we harbour such dreams of staying linked to the European Union? Beats me! But, it appears a minority of individuals do indeed harbour this fascination, sadly this minority make up the majority of our MPs. You have to question their vested interests.
The city you would think is immune from the tremendous regulation which is applied to the manufacturing sector as referenced in a previous post. Manufacturing deal in tangibles whilst Financial services are intangible. But, it would appear that makes no difference, the city of London is heavily regulated by the EU and overtures are frequently made to the Bank of England chairman to regulate further, regulation that would drive whole sectors of financial services to other established financial sectors from across the world, benefiting neither Europe nor the UK. The City of London is a remarkable success story and is frequently labelled by the Global Financial Centre Index (GFCI) as number 1. In all the Financial Service Metrics, beating the New York, Singapore, Hong Kong, and Japan. Indeed, London ranks first in all five key areas of competitiveness: people, business environment, market access, infrastructure and general competitiveness. Ironically, the UK base is favoured across a spectrum of industries as detailed in many of my blogs.
European Union Commission
Not wishing to demean the importance of the City Of London business’, but to put this into perspective the European Union represents approx. 3.5% of our total national income, manufacturing 10%. In addition, let’s not forget all the ancillary business which sits around the side of Financial Services such as Legal entities, law firms etc. The UK would indeed be impacted should an icy chill emanating from Europe pass over London. But, my guess the adults would see, that such a chill would do harm to all parties with no European city benefiting. But rational adult thinking in the corridors of the Elysee palace appears not to be a strength or is it, misguided perhaps.
Financial Services Conclusion
It is clear that Brexit has no bearing on the EU desire to break the City of London stronghold. Ambitions have long been played to take large parts of London’s Financial services. The City has been a bugbear for the European Union concerned by the Euro business being conducted in London. Brexit has made no difference to this view. Even when the UK was looking likely to remain in the EU it was still outside the euro, and looking likely to remain so, the EU authorities even at this time wanted to strip London’s financial business’ – especially in euros – looking for them to be transferred to Paris or Frankfurt.
I’ll end here with a quote:
Writing in the Financial Times in March 2017, Christian Noyer, the former Governor of the Banque de France, said: ‘No other sovereign or monetary zone would allow itself to rely on an offshore centre.’ reference here
This is a bizarre statement, all do!