13th December 2019
The UK remains the world’s leading net exporter of financial services, making London arguably the world’s financial capital. Maintaining stability in the sector is vital not only to the UK’s economy, but also to that of Europe. Could the UK’s vote to leave the European Union, and all that Brexit may entail, jeopardise London’s position?
London is a popular choice with many in the financial services industry for various reasons: its convenient time zone, use of the English language and regulatory regime, to name but a few. Several other European cities are vying to replace London as the main European financial hub: Dublin, Luxembourg, Paris, Frankfurt… whilst all are able to compete on the above factors, it is clear from speaking to those in the industry that personal considerations play a large part in the decision-making process. Some of the cities in contention lack the basic infrastructure required to accommodate London’s huge financial services workforce, with London enjoying considerable competitive advantages in terms of its ecosystem of support services. However, whilst London as a city remains a draw for the industry’s talent pool, a barrier to this may arise with the requirement for work permits and visas.
The biggest threat to London’s position is the potential loss of passporting rights. It is currently unclear how Brexit will impact the regulations, however regulatory equivalence is widely anticipated as the solution. Brexit also presents a longer-term opportunity, for bilateral trade agreements with emerging financial centres such as Singapore and Hong Kong.
With a recent further delay to the Brexit date, and stalled negotiations between the UK and EU, the full potential impact of Brexit on the UK’s financial services industry remains to be seen. Meanwhile, many firms had been more concerned with the General Election and the prospect of a Labour-led government. Now that PM Boris Johnson’s Conservative majority is vastly increased, 31 January’s Brexit deadline is looking increasingly feasible, and the coming weeks will no doubt begin to bring some clarity as to what Brexit might mean for the sector.