Don’t count on luring big banks from London, says City boss
London will remain Europe’s only truly global financial centre, says representative to EU
Jeremy Browne: said that although US investment banks who operate across Europe are considering relocating staff in the euro zone, some will prefer a location on the continent.
Dublin’s attractions for banks seeking to relocate staff from London after Brexit are partly offset by Ireland’s location and the small size of the domestic economy, the City of London’s special representative to the EU has said. Jeremy Browne told The Irish Times that although American investment banks who operate across Europe are considering relocating staff in the euro zone, some will prefer a location on the continent.
“The advantages for Dublin are that English is the first language, the same time zone as London, a fairly business-friendly political culture. Disadvantages: it’s geographically further from the middle of Europe. If the whole purpose is to try and make it easier to interact with people across the EU, there’s a case to be made for being closer to the middle of the continent,” he said.
“It’s quite a small domestic economy. I don’t really mean in terms of selling into it but it depends on how much support you might want from government. You might feel more secure sitting in a country with a bigger public balance sheet.”
A former Liberal Democrat MP and foreign office minister, Mr Browne was in Dublin last week as part of a tour of EU capitals to make the case for a special relationship between Britain and the EU on financial services. The City was overwhelmingly in favour of remaining in the EU and many firms still hoped after the referendum that Britain would remain in the European single market.
Remaining in the single market would allow London-based firms to retain such privileges as “passporting rights”, offering services across the EU under a single set of regulations. Mr Browne acknowledges, however, that Brexit is likely to involve a much clearer break from the EU.
“I think the referendum result can be interpreted in lots of different ways but I think it’s very hard to interpret it as a mandate for absolute freedom of movement between the EU and the UK... I think it’s also very hard to interpret the referendum as a mandate for Britain continuing to pay into the EU budget at existing levels,” he said.
“And I think the other problem with the single market is that Britain would be in a position and the City of London would be in a position of having to obey rules it had no ability to shape... There would be a strange situation where the 27 member states of the EU, including some that have no financial services industry of any note, are sitting inside the room deciding the rules for financial services in Europe. And Britain, which has by far the biggest financial services sector and the most expertise, is excluded from the room. And I think a lot of people in Britain would feel that that is the worst of all worlds.”
Special deal for city
City firms are already drawing up contingency plans to relocate some staff elsewhere in Europe but Mr Browne believes that, even in a worst-case scenario, London will remain Europe’s only truly global financial centre. Some businesses will be affected more than others but some will not be affected at all but most are waiting to see the shape of Brexit before making a move.
“Let’s say their best case scenario is they’ll move 200 people and their worst case scenario is they’ll move 1,000. Well, let’s move the first 200 as an interim measure and then we’ll see. They don’t want to do more than they have to do because it’s expensive and disruptive,” he said.
Mr Browne argues that it would be in the EU’s interest to agree a special deal for the City after Brexit and to involve Britain in shaping common financial regulations for the EU and the UK. He admits that special pleading for the City can sound self-serving and claims that some in Brussels are blinded to their own self-interest by their determination to punish Britain for voting to leave.
“I think there are some people on the EU side of negotiations for whom inflicting some sort of economic harm on Britain is so important to them for strategic reasons that they are willing to accept some economic harm to themselves in order to achieve that objective,” he said.
With prime minister Theresa May already signalling that controlling immigration and regaining sovereignty will take priority over other issues in Britain’s EU negotiations, the City’s interests may not be paramount in her government’s mind.
“A lot of what Theresa May has been saying about rebalancing the economy, industrial strategies, opportunities for people right across the country, are on the face of it entirely reasonable propositions. But you could if you wished to see a subtext in that, which is that the globalisation and internationalism which the City represents is not entirely in vogue, not necessarily just in the British government but in wider British public opinion,” Mr Browne says.
“We need to realise that the British government has to have regard for the interests of the UK and all its 65 million citizens. So we’re important but we’re not the only show in town.”