{"id":4218,"date":"2020-03-01T13:22:02","date_gmt":"2020-03-01T13:22:02","guid":{"rendered":"https:\/\/www.sportsnewsforyou.com\/?p=4218"},"modified":"2020-03-01T13:22:02","modified_gmt":"2020-03-01T13:22:02","slug":"brexit-and-the-city","status":"publish","type":"post","link":"https:\/\/googmn.com\/?p=4218","title":{"rendered":"Brexit and the City"},"content":{"rendered":"<figure class=\"art\"><figcaption>\n<p>City of London skyline | Dan Kitwood\/Getty<\/p>\n<\/figcaption><\/figure>\n<header>\n<h1>Brexit and the City<\/h1>\n<p class=\"subhead\">Take the City out of Europe and there won&#8217;t be much left of its current global luster, warn London-based bankers and financiers.<\/p>\n<\/header>\n<footer class=\"meta\">\n<p>\n\t\t\tBy\t\t\t<span class=\"byline\"><br \/>\n\t\t\t\t<span class=\"vcard\">Pierre Brian\u00e7on<\/span>\t\t\t<\/span>\n\t\t<\/p>\n<p class=\"timestamp\">6\/10\/15, 5:30 AM CET<\/p>\n<p class=\"updated\">Updated 5\/18\/16, 4:16 PM CET<\/p>\n<\/footer>\n<p>LONDON \u2014 It\u2019s a strange world when you can\u2019t trust a\u00a0conservative UK government to defend the global interests of the City of London.<\/p>\n<p>And that&#8217;s why the financial industry\u00a0isn\u2019t bothering to wait for talks between Prime Minister David Cameron and his European partners to state clearly on which side it will stand on a referendum on the UK\u2019s European Union membership: a resounding, unqualified \u201cyes\u201d for\u00a0staying in, whatever the outcome of London\u2019s attempt to reform the way Europe works.<\/p>\n<p>The arguments all center around one overwhelming reality: In the last decades, London has become a global financial center, rivaling Wall Street \u2014\u00a0but it could only do so because it is first and foremost Europe\u2019s financial capital.<\/p>\n<p>Take the City out of Europe, and there won\u2019t be much left of its current global luster, warn London-based bankers, asset and fund managers and insurers.<\/p>\n<p>\u201cBrexit\u201d supporters say the fears are overblown, and there might be a way for London-as-financial-center to prosper outside the EU. But the overwhelming feeling among business circles, across all industrial sectors, is that it would severely hit the British economy.<\/p>\n<p>\u201cOf course the EU needs to reform, but even right now, the benefits of membership for the UK hugely outweigh the disadvantages,\u201d says Andy Bagnall, campaigns director at the Confederation of British Industry, the UK\u2019s employers federation. Sir Mike Rake, the CBI president, recently made a speech asking UK businessmen to enter the fray by \u201cbeing crystal clear that membership is in [the] national interest.\u201d<\/p>\n<p>This week, Moody\u2019s, the ratings agency,\u00a0became the latest institution to warn that leaving the EU would isolate the UK economy from trade and growth opportunities, put pressure on the pound sterling and perhaps\u00a0lead to a downgrade of the country\u2019s sovereign debt.<\/p>\n<p>Fears of the Brexit risk are even more vivid in finance, the one sector where the UK is the undisputed European leader \u2014\u00a0and which would have the most to lose if London decided to split. In a report published in March, Open Europe, the London-based think tank, noted that leaving the EU would have the most severe consequences for the UK financial services industry.\u00a0More than 40 percent of the City&#8217;s business is with the rest of the EU, generating a\u00a0\u00a316 billion (\u20ac22 billion) annual trade surplus in financial services.<\/p>\n<p>For London financiers, the nightmare scenario goes like this. First, the City loses its easy access to the European market. Then, with active encouragement from other, hostile European capitals, part of the financial industry relocates to the continent. \u201cA lot of activities will repatriate to Paris or Frankfurt,\u201d says the chief operating officer of a major French bank with important business in London. \u201cI\u2019d say mostly Paris,\u201d\u00a0he quips. \u201cI don\u2019t think bankers are eager to go live in Frankfurt.\u201d<\/p>\n<p>Losing access to Europe\u2019s single market will become automatic if the UK leaves. It can then either opt for a \u201cthird country\u201d status and renegotiate all its existing arrangements and treaties with the EU, or try to remain within the single market \u2014\u00a0like Norway \u2014\u00a0but without any say on its rules and regulations. In other words: London will be either cut off, or powerless.<\/p>\n<p>That explains why some major banks such as HSBC or Deutsche Bank have already indicated that they might switch operations from London in case of an EU exit. For both banks, there would be other reasons for the move \u2014\u00a0and neither one might end up actually relocating to the continent. Asia will be HSBC\u2019s natural destination, and Deutsche may be tempted by New York.<\/p>\n<p>The worries aren\u2019t exclusively those of European banks. U.S. institutions have long seen London as the entry point to the rest of Europe and would look elsewhere to conduct their continental business. In the last couple of years, banks such as J.P. Morgan or Goldman Sachs have warned about the possibility of Brexit. European banks would leave London \u201cin very short order\u201d if it ever happened, Goldman Sachs International co-chief executive Michael Sherwood famously warned in September, 2013.<\/p>\n<p>The exodus would be a natural for all the European banks that domiciled most of their wholesale activities (i.e., lending and borrowing between financial institutions themselves) in London over the last 20\u00a0years. Prompted by lighter regulations and a friendly tax system, Italian, German or French banks made London their second headquarters in all but name. They would have little reasons to remain if the UK wasn\u2019t part of the same economic space.<\/p>\n<p>The risk of relocation is acute in finance, but industrial companies fear Brexit as well. Their business with the continent would be severely hit if the UK sits outside the single market. And their exports to the rest of the world would also take a beating, as London will have to renegotiate the dozen trade treaties the EU has signed over the years with other countries.<\/p>\n<p>But it\u2019s hard and cumbersome to move a British car-parts factory or pharmaceutical production line to Spain or Italy. Finance types, on the other hand, can move anywhere in the world overnight. It only takes a one-way Eurostar ticket for a banker to relocate.<\/p>\n<p>A major financial exodus would come at a high fiscal cost for the UK government. It gets about 11.5 percent\u00a0of its tax revenue from the financial services industry. According to a recent PwC report, the sector paid an estimated \u00a366 billion (\u20ac89 billion) in to total taxes in the fiscal year 2013-3014. Almost half of this was made up of the income tax paid by the 1 million-plus employees working in finance.<\/p>\n<p>No wonder that nearly half (49 percent) of City professionals polled earlier this year by the Center for the Study of Financial Innovation would \u201cdefinitely\u201d vote no to Brexit, while another 24 percent are \u201clikely\u201d to vote the same way. That\u2019s nearly three out of four bankers, traders of fund managers eager to remain within the EU.<\/p>\n<p>Younger financiers are even more Europhile than their elders \u2013 which is consistent with all other polls on the matter:\u00a0Eighty percent\u00a0in the 18-30 age group would favor remaining within the EU. And according to the CSFI study, the City is\u00a0strictly driven by its own interests here: It wants to remain in the EU even though \u201cit doesn\u2019t like Brussels, fears European regulation and is worried about the political drift of the EU.\u201d<\/p>\n<p>For the City, there would be bitter irony in Brexit, after the UK\u2019s huge contribution to the creation of a European financial single market. No EU financial regulation has ever been adopted against the opposition of London, and most bear the influence of the light-touch regulation school that dominated the pre-crisis years. The\u00a0liberalization pursued since then has expanded even further the opportunities offered to City players. Richard Metcalfe, the director or regulatory affairs at the Investment Association, which represents asset managers, mentions for example the possibility to \u201cmarket funds throughout the EU, with a high level of safety and economies of scale.\u201d<\/p>\n<p>The City has even benefited from a seismic shift it wasn\u2019t a part of: the creation of the euro. The monetary union has created a single-currency financial market whose capital is London \u2014\u00a0even though it chose\u00a0to opt out. The City has prospered outside the eurozone \u2014\u00a0but largely thanks to the eurozone.<\/p>\n<p>Finally, the UK might leave just as the EU is embarking on a reform that would offer even more opportunities for London\u2019s financiers: the capital markets union, designed to break down remaining national barriers to the free flow of capital and allow seamless financing of the economy throughout the EU. The reform falls under the\u00a0jurisdiction of UK European Commissioner Jonathan Hill, who has started the job in earnest.<\/p>\n<p>You can still find a minority of hardcore Euroskeptics in the City of London. They argue that London could not only survive, but even prosper as an off-shore center, geared towards the needs of global \u2014\u00a0as opposed to strictly European \u2014\u00a0financial markets. The UK, so the theory goes, would revert to its light-touch regulation model, break free from the cumbersome Brussels bureaucracy and better cater to the needs of emerging economies from Asia to the Middle East.<\/p>\n<p>The argument pays scant regard to the fact that if anything, UK regulations of banks or the financial sector have been as strict as in the rest of Europe, if not stricter, in the last five years. Unsurprisingly the City of London has lost in popularity since the 2007-2008, so any government would think twice before it wants to restore it to its former unregulated glory.<\/p>\n<p>Then there\u2019s the question of the EU\u2019s possible reaction. \u201cThere would be active retaliation,\u201d says Leon Cornelissen, chief economist of Robeco, the \u20ac200 billion Dutch asset manager. \u201cEuropean governments will resent an overblown financial center at their door and they could really make things difficult for London\u201d through potent regulation or protectionist measures.<\/p>\n<p>For now \u2014\u00a0precisely because the financial industry is not at its height in popularity at the moment \u2014\u00a0City lobbies don\u2019t plan to campaign aggressively, and bet that reason will prevail overtime.<\/p>\n<p>\u201cOnce tempers cool, they will look at the numbers and get real,\u201d says a London investment banker, talking about British voters and reflecting the general sentiment, or hope, of the City. Meanwhile, in executive suites, contingency plans are drafted in case reason doesn\u2019t prevail. And financiers are already confronted with the clear and immediate risk presented by the Brexit debate: its utter unpredictability.<\/p>\n<\/p>\n<footer class=\"content-credits\">\n<h6>Authors:<\/h6>\n<dl class=\"vcard\">\n<dt class=\"credits-author\"><span class=\"vcard\">Pierre Brian\u00e7on<\/span>&nbsp;<\/dt>\n<\/dl>\n<\/footer>\n","protected":false},"excerpt":{"rendered":"<p>City of London skyline | Dan Kitwood\/Getty Brexit and the City Take the City out of Europe and there won&#8217;t be much left of its current global luster, warn London-based bankers and financiers. By Pierre Brian\u00e7on 6\/10\/15, 5:30 AM CET Updated 5\/18\/16, 4:16 PM CET LONDON \u2014 It\u2019s a strange world when you can\u2019t trust&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-4218","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/posts\/4218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4218"}],"version-history":[{"count":0,"href":"https:\/\/googmn.com\/index.php?rest_route=\/wp\/v2\/posts\/4218\/revisions"}],"wp:attachment":[{"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/googmn.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}