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While it is still the only global centre to rival New York, London has seen some business and job losses since the shock 2016 Brexit vote and financial services were largely forgotten by British leaders during EU divorce negotiations, cutting the City off from its biggest single customer.
“It’s disappointing to lose business but it’s not at all catastrophic,” Catherine McGuinness, who leads the ancient financial district’s ruling body, the City of London Corporation, told Reuters.
The City, McGuinness said, neither wanted nor expected Prime Minister Boris Johnson’s government to light “a bonfire of regulations”. Still, a financial capital the size of London could not be a “rule taker”, she said.
“We’re not looking for a bonfire of regulation, we’re not looking for a move away from international standards – absolutely not,” McGuinness said. “We’re not expecting any major deregulation at all.”
Asked if it was worth Britain seeking so-called equivalence, essentially agreeing to stay aligned with EU financial rules in return for market access, McGuinness said: “I would hope that equivalence decisions could be made because they ought to be pragmatic and we are completely aligned in terms of rules.”
It would be irrational of the EU to refuse, she said.
“Its clear that we can’t be rule takers – we must be rule makers. We need to look at what our strengths are and what we need to do to build on them effectively – and hopefully that’s against the framework of international regulations that we will help to shape.”
The EU says it wants to examine planned UK divergence from EU rules before deciding on any UK access.
London’s Brexit job losses so far to the EU were around 7,500, McGuinness said, still at the low end of the range predicted by investment consultant Oliver Wyman which said in 2016 that the British capital could shed 65,000 to 75,000 jobs in a sector that employs a million people.
London dominates the world’s $6.6 trillion-a-day foreign exchange market, it is the biggest centre for international banking and the second largest fintech hub in the world after the United States.
New York retained the top spot in a survey of global financial centres published in September by Global Financial Centres Index, with London strengthening its position in second.
While trading in euro shares and some derivatives has left for other European centres – with some to New York – after Brexit, no one European competitor has dominated and so London views New York, Shanghai, Tokyo, Hong Kong and Singapore as its true rivals.
Some elements of the bond, derivatives and capital markets had moved after Brexit, McGuinness said, though London retained by far the deepest capital markets in its time zone.
The finance sector pays more than 10% of Britain’s tax bill, but McGuinness said in 2019 that British leaders were throwing it under a bus during Brexit negotiations by focusing on the goods trade and largely ignoring finance.
Britain’s trade deal with the EU, clinched last month, does not cover financial market access.
“It was disappointing, it was very surprising. I’ve speculated it’s because fish is more picturesque than finance, it may be that we don’t tell our own story well enough or perhaps they felt the sector was big enough it make its own way,” she said.
McGuinness said she hoped Johnson’s government would now focus on the future of the City, helping green finance, fintech, Environmental, Social, and Corporate Governance (ESG) and new types of companies generate capital.
“I think we’ll stay the FX capital of the world – that would be my prediction,” McGuinness said when asked about the long-term future of the City. “We are very confident in London’s basic strengths and that we will make up business elsewhere.”
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