The City of London - after Brexit

City of London - Post Brexit

At present the City of London is the world's leading financial centre. Its origins date back to the Roman conquest of Britain in AD 43 and the settlement of Londinium. The Roman historian Tacitus described London as 'a town of the highest repute and busy emporium for trade and traders'. 

London's development in the Middle Ages as a port resulted in it becoming populated by merchants who became increasingly wealthy. The merchants used their wealth to provide finance. Following the advent of the joint stock company in the 17th Century, the City became a burgeoning financial financial and commodity market place. Names of City streets such as Bread Street, Milk Street and Fish Street indicate the nature of the markets in those areas. The markets today trade commodities, shares, bonds, derivatives on exchanges (usually electronically) as well as a very large range of instruments over the counter. 

Some reasons for the continuing success of the City are:

location between the Far Eastern and American time zones

highly developed infrastructure 

pool of skills 

the ability to adapt and innovate

trading culture

Banks, insurance companies, brokers, market makers and dealers in financial instruments choose to locate in London becuse of the above reasons on the one hand and because, under current EU rules, having located in the UK, they can 'Passport' i.e. offer services in Europe without the need to get regulatory approval from the EU countries they wish to operate in. Therefore it is important that 'Passporting' continues if possible after Brexit.

But Frankfurt, Luxembourg, Paris and Dublin would like to migrate the financial services business that takes place in London to their own centres and will seek to stop Passporting after Brexit. 

Arrangements to mutual advantage of London and the other (hitherto competing) European financial centres will have to be developed.

The UK Prime Minister or senior civil servants speaking to their counterparts in Europe is unlikely to yield sufficent sustainable benefits to London / the UK.

If the UK were to send the European Commission, say five technical advisors, free of charge, the options that would reach senior officials / members are likely to have been constructed with sufficient ingenuity and flexibility to be of mutual benefit.

When the Investment Services Directive was being drafted, I was the sole technical advisor on financial services to the Commission. I was able to help drafting to take account of the greater range and scope and different structure of financial services in the UK.

Subsequently that degree of technical involvement doesn't seem to have taken place. For example the CoREP directive requires even three man proprietary trading firms to fill in the same 27 spreadsheets worth of returns that a major bank does. Moreover the returns have to be converted to XBRL and sent to the European Banking Authority. For Europe, this makes sense because in Europe, banks undertake the business undertaken by brokers, market makers and small proprietary trading firms in the UK. But it does not make sense for the UK. 

Appropriate action does need to be taken quickly to preserve the pre-eminent position of the City post Brexit.