A leading financial services lobby group has warned the government that London is at risk of losing its status as a global financial centre.
A report published today (7 September) by TheCityUK claims that the City of London has declined over the past decade in certain sectors against its biggest competitors, such as New York and Hong Kong.
TheCityUK includes its recommendations to address this decline in its plan to help London “regain financial centre leadership in five years”.
It has worked with 60 financial services groups to develop the proposal, according to the FT.
Visas, tax and trade deals
The report includes recommendations for more flexible visa rules, a review of taxes on the financial sector, and a suggestion that all new trade agreements should increase market access for financial and professional services.
“Europe is littered with cities that were once the leading international centre of their day,” said Miles Celic, chief executive of TheCityUK. “The last decade has been one of growth for our industry, yet global competitors have grown faster.”
Service gap
As previously covered in the IOE&IT Daily Update, services were not part of the UK’s post-Brexit trade deal with the EU, leaving the City with less access to European financial markets.
As a result, the UK is involved in protracted negotiations with the European Commission over the mutual recognition of each other’s’ regulatory regimes for financial services, which would open up EU financial markets to City firms in a so-called ‘equivalence’ deal.
Although the UK unilaterally recognised the EU’s regulations in December last year, Brussels has been slow to follow suit, fearful that the UK will seek to diverge from its rules.
Although the two sides reached a memorandum of understanding earlier this year, the resultant Joint UK-EU Financial Regulatory Forum only provides a platform to discuss future co-operation in the sector.
European competition
This has also allowed European competitors to attract business previously handled by the City. Reuters has reported that big banks such as Morgan Stanley, Barclays and Goldman Sachs have moved more of their senior staff to EU centres.
In the absence of a deal on equivalence, some commentators have suggested that the UK financial sector concentrate instead on opportunities in other markets beyond the EU.
Chinese opportunity
According to the Telegraph, one of TheCityUK recommendations is a charm offensive on China to offer to help Beijing develop its capital markets and expand its green finance and fintech industries.
The approach aligns the lobby group with Chancellor Rishi Sunak, who has called for a “mature and balanced relationship” with China.
Earlier this summer, Sunak said that the failure to get an equivalence deal provided the UK with the “freedom to do things differently and better”.
As covered in the IOE&IT Daily Update, the chancellor used his Mansion House speech to lay out his post-Brexit vision to make the UK the most “advanced and exciting” financial services hub in the world.
Differing views on the future
According to a recent report in the Standard, gloomy predictions of the City’s post-Brexit situation have been wide of the mark.
It quotes a European Banking Authority report which puts the number of top bankers that have left London at just 95.
Other reports are more damning on the Brexit effect.
The Insurance Journal reports that more than 400 financial firms in Britain shifted activities, staff and a combined trillion pounds ($1.4 trillion) in assets to hubs in the EU due to Brexit, and said more pain was to come.