City of London urges courting of ‘old’ friends like US, Japan after Brexit

City of London skyline at sunset

The Capital Markets Union will arguably become even more important after the UK, one of the EU’s largest economies, departs from the bloc. In the picture, the City, London's financial district. [Shutterstock]

Deepening ties with European companies and “old friends” like the United States and Japan would help Britain preserve its global role in finance after leaving the EU, an industry body said on Wednesday.

TheCityUK published a to-do list for the financial sector and government, saying June’s vote to leave the European Union magnified the challenge of keeping up with global competition in finance.

Frankfurt, Amsterdam, Paris and Milan all hope to win a slice of London’s market share in financial services.

Last month, French President François Hollande said other European financial centres should be ready to take over from London, which is home to many banking clearing houses that deal with euros.

“There is no reason for Europe, and still less the eurozone, to allow a country that is no longer a member of the European Union and has never been a member of the eurozone to continue operations in euros,” Hollande said after the June EU summit in Brussels.

Hollande says post-Brexit City must relinquish euro business

Britain’s City of London financial district would have to give up its role in processing euro currency transactions after it leaves the European Union, French President François Hollande warned on Wednesday (29 June).

TheCityUK’s chief executive Chris Cummings said Britain must make more of how much companies across Europe rely on Britain’s financial services and allied professions like accounting and law to do business.

The backing of these companies would be important in upcoming UK-EU trade talks to ensure continued access to the single market.

“What I hear from major European corporates is they like to do business through London due to the depth of the talent pool and capital markets here,” Cummings said.

As major “buyers” of financial services still want to come to London, the “sellers” such as banks are staying put, he added.

“We are talking about mutual market access. France or Germany could build deeper pools of capital, but that could not happen quickly.”

In its report, the industry body called on the finance ministry to strengthen its Financial Services Trade and Investment Board.

Its work should also focus as much on “old friends” like the United States and Japan as on new markets in China and India.

Britain’s new trading terms with the EU may not be known for several years.

Last week, EU Commission president Jean-Claude Juncker nominated Michel Barnier to lead the Brexit negotiations with the United Kingdom.

Frenchman Barnier was responsible for the wave of financial services regulation that was proposed by the Barroso Commission after the crisis. Barnier had a testy relationship with the City of London.

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“We must now speak confidently and with one voice to policymakers to help inform them about the deal we want to see from the upcoming negotiations,” TheCityUK Chairman John McFarlane said.

In the meantime, he added, it is crucial that the government drums home the message that Britain is a stable place to do business.

Cummings said it was realistic that Britain’s new Prime Minister Theresa May wanted to review a major project like the Hinkley Point nuclear power plant, a move that has taken China, one of its backers, by surprise.

But it was important that Britain remains open to business, and that the prime minister and her team continue to build a constructive relationship with European leaders, Cummings said.

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