Has the City of London benefitted from Brexit as the golden days continue to fade?

July 5 2023, by Graham Bishop

Three years after leaving the EU, there are no discernible signs of any benefits for UK finance.

Instead, there are multiplying and worrying signs of a lack of substance to the initial, bold slogans. Leadership seems to be slipping away from the UK in many fields as the EU continues to exercise its soft power of setting standards that acquire global standing due to its economic scale. There seems to be no plausible route to significant improvement for the UK outside the European Union.

The bravado of fine announcements has given way to the reality of little content in terms of business creation. The flagship Financial Services and Markets Bill has just become an unimpressive Act.

The MoU on financial service cooperation with the EU is revealed as a talking shop that leaves EU autonomy unfettered.

The City’s global standing is slowly sinking – as the City’s leaders recognise with some alarm.

There are worrying signs about many of the City’s core activities:

equity trading of EU shares went to Amsterdam and London is now smaller than Paris;
new equity listings are declining;
risks remain for the `delegation’ of asset management functions;
Solvency II reform (a Brexit war cry!) may be achieved only slightly ahead of the EU’s own reform;
digital strategy remains fine plans while the EU completes its legislation;  
`Greening’ was meant to be a leadership icon but the UK is on the verge of becoming a rule-taker as the EU’s granular legislation comes into force.

EU enforcement of rules on bank risk management/trading is ramping up, and senior roles are shifting to the mainland.

The location of Euro CCPs is set to shift amid stark warnings about the necessity of preserving the EU’s financial stability.

The financial sector’s tax revenues – 10% of total receipts – and foreign earnings – net £44.7bn in 2021 – are under threat while the UK balance of payments remains precarious – relying on the continued “kindness of strangers”.

The sector employs 1.08m in the UK and, together with business services, 220,000 in Scotland, according to the Scottish Government.

This blog is based on the executive summary of a new paper for the Federal Trust. The full paper is available here.