‘The role of the City as a global financial centre for Europe’ hosted by Scotland House Conference Centre, Brussels on Tuesday, 29 November 2016
Jeremy Browne, Special Representative of the City to the EU
Seb Dance, MEP, UK Labour Party MEP for London
Pierre Pourquery, Partner, UK Capital Markets, EY
Hans Hack, Head of Financial Services at FTI Consulting
European Union corporates are concerned about the UK’s impending exit from the EU but the real impact is as yet unclear. This conclusion, one of several arising from new research by EY, sparked a lively debate about Brexit’s potential effects on the City of London, the UK and EU.
EU corporates believe that a ‘hard Brexit’ will have potential negative impacts on their business.
Potential impact of Brexit must be explained to a wider range of EU corporates and policymakers – this should be factual not political.
There remains time to ‘educate’ corporates, policymakers and financial firms about the potential impacts of Brexit: this should be our priority.
The EY study, commissioned by the City of London Corporation, presents the views of a small sample (15) of EU corporates of varying sizes in seven Member States on the perceived impacts of Brexit. It includes the views of 12 financial services suppliers, six academics and six European and UK trade associations plus industry data. It emerges that EU corporates believe that a ‘hard Brexit’ will have potential negative impacts on their business. According to Pierre Pourquery, presenting this study, ‘The loss of the City financial cluster would mean that the cost of some financial services, like funding, is likely to increase for EU corporates while the market capacity of these services may be reduced.’ He added that there is uncertainty over the scale of the potential increase in costs, the potential reduced capacity of services and the potential impact on the EU’s economic growth.
The study highlighted consensus about the value of the City cluster of financial services, such as the large talent pool and widely recognised legal and regulatory frameworks. These are unmatched anywhere else in Europe and hard to replicate in less than 20 years, as shown by cities such as Shanghai. Indeed, although Brexit may lead to a more fragmented City, it seems that there is no great urge for financial services to move abroad. ‘The UK makes lots of corporate lending to the EU, some £750 billion, so a hard Brexit could hit the EU hard,’ added Mr Pourquery.
‘Although London is a key financial hub, we mustn’t be complacent about the negative impact of Brexit on attracting business,’ said Jeremy Browne, City of London Corporation. Seb Dance, MEP, agreed and called for the UK government to listen to concerns and do everything possible to stay in the Single Market. ‘Rhetoric and reality must meet each other: not all 52% of the UK pro-Brexit voters are anti-Single Market,’ he added. Hans Hack of FTI Consulting also noted how Brexit could harm the EU, which benefits from UK expertise in financial regulation. He highlighted concerns about the City’s ability to keep the same access to the EU without passporting and equivalence.
Wrapping up the debate, Jeremy Browne said it looks likely Brexit will happen but that the City and UK must keep talking to Europe. ‘In some ways, the City is a supranational institution that transcends the UK. It’s a huge asset for the EU but it will have to adjust and adapt post-Brexit,’ he said.