A couple of hours after the UK referendum – Brexit – rumours about a possible exodus of financial institutions from London to other centres in Europe took over the media cycle. Paris, Frankfurt and Dublin are the prime ‘suspects’ according to the majority of commentators, but New York and some Asian cities could also be on the cards.
If these rumours became reality, it would be a significant loss for the UK. Over the last years, London became the world’s leading financial centre according to the Global Financial Centres Index (GFCI), which ranks the competitiveness of some 29,000 hubs. Respondents to the GFCI questionnaire believe that London and New York are the only two truly global financial centres and that competitors such as Frankfurt, Paris and most of the Asian cities will remain strictly national players.
The financial services industry covers a significant segment of the UK economy and employs more than one million people. Furthermore, the UK has the largest trade surplus in financial services in the world. This achievement is based on well thought-out policies. Indeed, England was the first to issue government bonds in 1693 to finance its wars, and the Bank of England was established the following year. This culture made the UK the dominant trading country in the world in the 18th and 19th centuries. The predominance of the English language also helped the UK play an important part, as did the geographical position between the US and Asia. However, a successful history is not a guarantee of future prosperity, especially when tomorrow is so uncertain.
The solution? Let London become an independent financial centre, like Singapore, Hong Kong and, to some degree, Shanghai. London’s mayor agrees:
“On behalf of all Londoners, I am demanding more autonomy for the capital – right now, […] More autonomy in order to protect London’s economy from the uncertainty ahead”
This way, London would lose certain types of activities to low-cost cities that are more relevant to some issues, but the important parts of the industry will continue to operate in the City, maintaining its position in the international landscape and maybe strengthening it through lighter regulations. London is at the beginning of a journey, and nobody knows what will happen. I just hope that wisdom and cooperation will guide our leaders in the most suitable manner for the safeguard of our interests.