Catherine McGuinness presents the City of London Corporation’s position regarding the Brexit Issue. They maintain that a transition period as part of a deal is vital to give the financial sector time to work through this complex process. But they are already taking steps to prepare the post-Brexit era.
How does British financial industry prepare itself for Brexit? Do you fear numerous relocations of activities towards EU in the months to come?
Large City firms have been planning on a worst-case scenario since day one, so they’ve been making contingency plans to be able to continue serving customers from day one after Brexit. Because firms don’t know what the future UK-EU trading relationship will be like, they are moving some jobs elsewhere on the continent. I am more concerned about smaller firms, who may not have had the capacity to prepare as extensively.
The numbers that we’re seeing are low, but these are jobs that otherwise would be in the UK. The latest projections we have put this at the lower end of a range of 5,000-13,000 in the first wave of Brexit-related job moves. However, these are early days. Firms are watching closely to see if a way can be found through the current Brexit impasse.
It’s important however to remember that London is at the forefront of many emerging parts of the market, such as fintech, where we are seeing huge growth and the creation of thousands of new jobs.
What kind of arrangement with the EU is the City of London advocating?
As the Government now seeks to renegotiate a withdrawal deal with the EU27 which Parliament can get behind, we still believe that locking in a legally binding transition period as part of a deal is vital to give the sector time to work through this complex process.
It is vital to find a solution to cliff edge issues, ensuring that both cross border data flows and cross-border contracts can continue to operate smoothly. There is still more that needs to be done on recognition of insurance contracts and derivative products. The commitment by the European Commission to maintain access for UK clearing houses on a temporary basis after Brexit is an important step forward to protect financial stability.
City firms need certainty about our future relationship with the EU in order to invest and create jobs across the UK. So as well as cliff edge issues, we will continue to press for a Brexit future relationship agreement which covers financial and professional services between the UK and EU27.
What is the reaction of the City of London to the “no deal” contingency action plan released by the European Commission last December?
The City Corporation believes a deal is better than no-deal. As mentioned, we welcome that the EU Commission has started to address some of the cliff edge risks of a no-deal scenario. It now needs to take steps to address the significant risk to data transfers and contract continuity for insurance and uncleared derivates at an EU level. These are issues that could disrupt cross-border financial services and prevent firms from serving their customers in the event of a no deal.
The City of London announced its will to “move swiftly to advance trade and investment opportunities with the rest of the world – both in developed and developing economies”: what steps have been already achieved in this direction?
London is a world-leading financial hub, with underlying strength and deep expertise across the full breadth of the financial industry ecosystem. There will be some impacts because of Brexit, but we will remain a leading financial centre after Brexit due to our flexibility, resilience and creative energy. Given that 90% of global growth in next decade will come from emerging markets, we are well-placed to make the most of future opportunities. In fact, I have just returned from a visit to India where there was strong interest in London’s offer in areas such as fintech. Two-thirds of the City’s business is with partners outside EU for example, and London is a crucial hub for networks of US, Asian, Gulf, African business and investment. And there’s much more: 11% of the world’s fintech industry is based here, we’re number one in the world for currency trading, first for cross-border banking and the leading Islamic Finance centre outside of the Islamic world, just to name a few examples of where London is already excelling.
The City of London also intends to “enhance the UK's positions – including through attracting more foreign direct investment and sustaining the industry's exports – through an even deeper partnership with government, regulators and business”: does that mean that regulation and specially financial regulation could be modified to support this objective?
We don’t want to see standards being lowered after Brexit as we believe our robust regulatory framework is an asset for the UK. There may, however, be some specific areas that the authorities want to examine once we leave the EU to ensure we are aligned internationally and also that there is a level playing field across the industry.
The City of London is working closely with organisations across both government and business to ensure that the UK continues to be one of the world’s most attractive locations for foreign direct investment. Examples of this include our work with TheCityUK – the promotional and representational body for the financial and professional services sector – as well as the International Regulatory Strategy Group, which has commissioned a number of new workstreams looking at regulatory issues relating to third countries, global competitiveness and regulatory coherence. As regards to the UK Government, we are working closely with the Department for International Trade, the Treasury and Department for International Development among others to find ways in which the City can promote emerging sectors such as fintech, green finance and more.