City of London mulls Brexit impact

LONDON (China Daily/ANN) -- One year on from euro-denominated share-trading by European Union investors being taken from the City of London and transferred to EU exchanges because of the United Kingdom’s exit from the single market, Brexit’s long-term impact on Britain’s financial sector remains unclear.

In this file photo taken on June 28, 2016, a man waves both a Union flag and a European flag together on College Green outside The Houses of Parliament at an anti-Brexit protest in central London.

While the upheaval immediately affected 6 billion euros (US$6.8 billion) of trading and looked certain to threaten London’s status as Europe’s dominant financial capital, the situation today is less disastrous than it first appeared, according to Alasdair Haynes, chief executive of the UK share-trading venue Aquis Exchange.
“In Europe, different centers are all fighting each other … to get business back at any cost,” he told the Financial Times newspaper in explaining how rival centers - including Amsterdam, Frankfurt, and Paris - have been too busy worrying about each other and the pandemic to fully focus on replacing London.
But, he said, his customers are now being looked after by an EU-domiciled subsidiary in Paris, so Brexit clearly was “an own goal “for the UK’s financial markets.
A year later, the City of London still faces uncertainty.
The post-Brexit trade deal agreed in late 2020 by the UK and EU makes little mention of financial services and London has since lobbied for the same market access that the bloc has granted New York, Tokyo, and Hong Kong, something known as equivalence. So far, Brussels has refused the request.
In addition to the UK failing to hang on to everything it had while a member of the EU, the country has failed to attract new financial activity from other parts of the world, according to the FT, which was something supporters of Brexit had promised.
The Daily Express newspaper said that, while a clear EU financial center to rival London has not yet emerged, Amsterdam has narrowly overtaken London as Europe’s largest euro-denominated share-trading center.
But the paper said London remains competitive, and a deal with Switzerland last year that allows Swiss share-trading to resume in the UK made up ground.
The UK, free from EU oversight, has also made it easier to list special-purpose acquisition companies, and, in December, the Financial Conduct Authority introduced more flexible rules aimed at attracting more technology companies.
Frank Eich, a former adviser to the Bank of England, said London remains “more diverse” and more “intentionally focused” than its rivals.
Writing in Germany’s RedaktionsNetzwerk Deutschland he said no other financial center offers the same “breadth and depth of specialist knowledge and skills”.
“Despite Brexit, London remains one of the most important global financial centers,” he said.
But Valdis Dombrovskis, executive vice-president of the European Commission, told the Financial Times the EU is confident it will ultimately replace London as the continent’s major financial center.
“We need to take the long view here: developing deeper capital markets in the EU is neither easy nor quick to do … We still have barriers to knock down,” he said.

(Latest Update January 13, 2022)