City of London’s plight as hopes for Brexit fade

Just over a week later, the city of London comes to a hardened realization about its future after Brexit: an agreement with the European Union for financial services is possibly too little, too late to protect its dominant position.

Negotiations will soon begin to determine the outlines of regulatory cooperation between the UK and the EU, after the industry was largely ignored in the trade agreement that marked Britain’s split from the EU on 31 December. A deadline for March has been set and so far details – including who will lead the discussions – are scarce.

The early days of Brexit spotted the game open: on January 4, the first working day after the transition period, London traded 6.3 billion euros ($ 7.7 billion) in daily shares to EU places. The overnight loss has given impetus to calls from financial companies and the London Stock Exchange to policymakers to ease rules and help the City gain a competitive advantage over European competitors.

Such a move emerged over the weekend, with the British Treasury saying it planned to do so allow trading in Swiss shares, and reverse an EU ban on activity. London’s ability to trade in companies such as Nestle SA en Roche Holding AG will help offset the loss of EU shares. But the attitude also deepens the separation of the UK from the EU, making the bloc less likely to provide access to the market.

These talks – aimed at a principle called “equivalence” – are open, without the deadline set by the trade transaction. Little progress has been made in most areas.

European officials have little incentive to reach an agreement, while financial hubs from Paris to Amsterdam win business at London’s expense. The Governor of the Bank of England, Andrew Bailey, sounded a bad note last week, saying access to the bloc may not depend on the standards set by Brussels.

While dramatic, the loss of EU shares is unlikely to have a noticeable impact on the tax the company generated in the UK, which was more than £ 3bn last year. But that was an immediate warning about the potential cost of Brexit. In total, the Square Mile in 2019 was about £ 75 billion in taxes, including taxes on labor, according to the City of London Corporation.

“EU stock trading has passed, it will not return,” said David Howson, president of Cboe Europe, the largest EU stock exchange in London. The company has seen nearly 95% of this business move, Howson said Thursday on Bloomberg Television.

How ‘equivalence’ is the key to post-Brexit banking services: Quick recording

Bankers and asset managers said the week was otherwise largely disruption-free. This was due to years of preparation by businesses, some of which involved pulling business – albeit less than initially feared – from the UK

Companies like JPMorgan Chase & Co. and Goldman Sachs Group Inc. has already shifted numerous 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 block.

Yet it leaves the businesses saddled indefinitely with the added complexity and cost of supporting operations in London and the EU. Others like Hargreaves Lansdown Plc have decided to stop marketing to European customers.