The plight of the City of London is exposed as hopes for Brexit fade

by

Just over a week later, the City of London comes to a hardening realization about its post-Brexit future: a financial services agreement with the European Union may be too little or too late to protect its dominant position.

Negotiations will start shortly to define the contours of regulatory cooperation between the UK and the EU, after the industry was largely sidelined in the trade deal that marked Britain’s split from the EU on December 31. A deadline for March has been set. and so far, details – including who will take the lead – have been scarce.

The early days of Brexit exposed the stakes: London lost EUR 6.3 billion ($ 7.7 billion) in daily stock trading to EU locations on January 4, the first business day after the transition period. The overnight loss spurred calls from financial firms and the London Stock Exchange to policymakers to relax the rules and help the city gain a competitive advantage over European rivals.

One of those moves emerged over the weekend, and the UK Treasury said it intends to do so Allow trading in Swiss shares, lifting an EU ban on the activity. London’s ability to offer trade in companies such as Nestle SA and Roche Holding AG will help offset some of the loss of EU stock. But the stance also deepens the UK’s divisions with the EU, making the bloc less likely to provide market access.

Those talks – centered around a principle called “equivalence” – are indefinite, without the deadline that governed the trade agreement. Little progress has been made in most areas.

European officials have little incentive to reach an agreement, while financial centers from Paris to Amsterdam are pulling in business at the expense of London. Bank of England Governor Andrew Bailey took a somber tone last week, saying that access to the bloc should not depend on Brussels’ dictating standards.

While dramatic, the loss of EU shares is unlikely to have any discernible impact on the tax the company generates in the UK, which was more than £ 3 billion last year. But it was an immediate warning about the potential cost of Brexit. As a whole, the Square Mile accounted for approximately £ 75 billion in tax in 2019, including taxes on labor, according to the City of London Corporation.

“EU stock trading is gone, it won’t return,” said David Howson, president of Cboe Europe, London’s largest platform for EU stocks. The company has seen nearly 95% of this business movement, Howson told Bloomberg Television on Thursday.

How ‘equality’ is the key to post-Brexit banking: QuickTake

Bankers and asset managers said the week was otherwise largely disruption-free. This was the result of years of preparation by companies, some of which were involved in relocating businesses – though less than initially feared – from the UK

Companies like JPMorgan Chase & Co. and Goldman Sachs Group Inc. have already shifted tens of jobs and hundreds of billions of dollars in assets, while asset managers including Janus Henderson Group Plc and Standard Life Aberdeen Plc use funds in Luxembourg and Ireland for clients within the bloc.

Still, this leaves businesses indefinitely saddled with the added complexity and cost of support operations in both London and the EU. Others, such as Hargreaves Lansdown Plc, have decided to discontinue marketing to European customers.

.Source