City of London Will Lose Global Status if Brexit Happens without Guarantees, French Expert Says

City of London Will Lose Global Status if Brexit Happens without Guarantees, French Expert Says

The City of London is poised to lose its global status as a hub for financial services if Brexit occurs without certain services sector guarantees, according to a French expert.

Such a loss of status for the City of London could take some time but will happen, warned Edouard-Francois de Lencquesaing, President of the European Institute of Financial Regulation (EIFR), during the Krynica Economic Forum in Poland.

The financial services sector accounts for about 12% of the UK’s GDP, and employs 1.1 million people. About a third of the global financial service transactions in the City of London – such as foreign exchange, commercial insurance, bond trading and fund management – involve clients in the EU.

“The rise of London as a global financial center was a mere accident of history,” De Lencquesaing said, as cited by DW.

“Like all industries, London at some point benefitted from the proximity of commodities, traders, intermediary institutions like insurance, but like all industries, it has to change and will,” he added.

According to the Oliver Wyman consultancy, if the UK strikes a deal giving it full market access to the EU, the impact of Brexit on the City of London would be in the range of 3,000-4,000 jobs.

However, if the UK has no special status with the EU after Brexit that will put 31,000 to 35,000 jobs, and about GBP 18 billion in revenue at risk.

In the “nuclear scenario” in which the European Central Bank forces the relocation of clearing of euro-denominated trading from London to the Eurozone, the City of London could potentially lose up to 230,000 jobs.

Sir Mark Boleat, an ex-chairman of the City of London Corporation, has warned that Brexit could result in the loss of 75,000 jobs and up to GBP 10 billion (EUR 11.1 billion, USD 12.9 billion) in annual tax revenues.

Banks such as JP Morgan, Lloyds, Barclays, HSBC and Goldman Sachs have already established subsidiaries in other EU countries.

“Well, of course there will be some costs,” David Lidington, UK Minister for the Cabinet Office and British Prime Minister Theresa May’s de facto second-in-command, said during the Krynica Economic Forum.

“But the Chequers deal proposes the UK in effect staying in the single market for goods, but having a looser relationship over services and it is the best deal we have. There is no counterproposal,” he said, arguing in favor of May’s embattled Brexit blueprint which has been criticized by the EU as well as figures in her ruling Conservative Party.

(Banner image: Flickr)

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