A year on from Britain’s official exit from the European Union, the City of London’s powerful financial sector still reigns supreme on the continent despite the loss of key businesses and bankers to rival hubs.
“London has spent hundreds of years as a global financial centre. Brexit is not going to change that, certainly not anytime soon,” said Lee Wild, head of equity strategy at Interactive Investor.
The City, whose high-rise offices are largely deserted by COVID restrictions, has yet to strike a post-Brexit deal with Brussels on equivalence, which would allow London-based businesses to operate fully in Europe.
Over the past year, London has lost out to rivals in the equity market, struggling to recover ground after a hammer blow unleashed immediately after Britain left the EU.
Trading on the London stock market fell by around 40% at the start of 2021 as London was prevented from offering EU-listed shares to customers outside the UK.
Amsterdam has benefited the most, overtaking London to become Europe’s largest hub in terms of equity trading volumes for much of the past year, according to Cboe Global Markets.
London remains the second largest financial center in the world behind New York when various factors are taken into account, including infrastructure, reputation and business environment, according to the Global Financial Centers Index 2021.
The City also remains a dominant financial center on a global scale in several markets, including foreign exchange and derivatives.
“Leaving the EU brings challenges, and there are threats from Paris, Brussels, Frankfurt and Amsterdam,” Wild told AFP.
“But the likelihood of European rivals snatching the crown of Europe’s main financial center from the UK is slim.”
The City can maintain a solid position in the world of finance also thanks to an extensive network of support services.
“London still has a huge amount in its favour,” said Russ Mould, chief investment officer at AJ Bell.
He said the city offers “an ecosystem of banks, advisers, lawyers, money managers and hedge funds… (providing) capital at an appropriate price to businesses that need it so they can invest. , innovate, develop and create jobs”.
No exodus of staff
Nevertheless, following Brexit, around 44% of UK-based financial services companies have moved or plan to relocate their operations or staff to the European Union, according to financial group EY.
Asset transfers totaled £1.3bn ($1.8bn, €1.6bn) at the end of last year, he added.
Dublin and Luxembourg are hosting the highest number of office moves, while Paris has won the most staff transfers.
French President Emmanuel Macron inaugurated the Paris premises in June for several hundred JP Morgan Chase traders from London.
According to EY, the British capital lost only around 7,400 financial roles.
This is seen as a drop in the ocean, with the UK financial sector employing over a million people, 400,000 of whom are based in London.
Recruitment consultants said while the pandemic had helped limit movement, a future exodus of staff from London to the European Union remained unlikely.
“London continues to be an attractive destination for investment and finance professionals,” said Hakan Enver, Managing Director of Morgan McKinley.
“To date, we have yet to see a Brexit exodus, and it is now unlikely to happen,” he told AFP.
London’s financial attractiveness was highlighted last year by a record number of companies going public.
There were 122 initial public offerings – the highest amount since 2007 – for a total market capitalization of £16.8 billion.
However, in 2021 there was also a record IPO of Euronext, whose exchanges include the Paris and Amsterdam exchanges and others across Europe.
“The real risk (for London) is not a ‘big bang’, but slow deflation as activity moves to other hubs, most likely the US or Asia, and that only if the UK is failing to respond to competitive pressures from other global financial centres,” said Jack Neill-Hall of financial industry lobby group TheCityUK.