Brexit could benefit City of London

There has been much written on how ‘The City’ – the metonym for all parts of London involved in activities across financial markets, banking, insurance etc – might fare were the UK outside the EU.

I believe that its future is favourable regardless of whether Brexit occurs, and very possibly more so. It would, after all, be free of the persistent threat of heavy-handed EU financial market regulation.

There is of course talk that firms operating across ‘The City’ might relocate. They may well do. What I would remind those cautious of this is that the participants in London’s financial service sector have changed regularly over the years, and will change anew; the revolving door bringing in quite different institutions originating from very different geographies as others leave. Yes, the size of Japan’s London off-shore financial services footprint having grown significantly in the late 1980s and early 1990s then shrunk, as it did others from across the world came to occupy London’s offices, employ its staff and engage in financial service activities across it.

Indeed, a raft of data, from employment to activity levels, shows that after cyclical ebbs and flows are taken into account, the net effect of these comings and goings has been positive for London; the latest headcount across professional financial and insurance sectors are at an all time high of 400,000. Now just consider the keen ambitions of Chinese financial institutions and others across the world without a sufficiently developed ‘western hub’. I would maintain that for these there is no plausible alternative to London, regardless of Brexit, no other credible location because of a variety of regulatory, sizeable labour skill-set and indeed linguistic reasons. Quite simply neither Frankfurt nor New York will win over London for this hugely important and lucrative role. Indeed, I am sure London will prove China’s preferred western hub across multiple sectors which need to operate continuously over any 24-hour period, and to repeat see this as the case regardless of our continuing within the EU.

As for who will work in these new operations, the answer is Europeans who apply through whatever work-visa system is instituted post-Brexit, and crucially Chinese and other emerging world nationals, many of whom I have no doubt will be fast-tracked in.

Let me reflect for a moment on the decision by the ‘Sino-British’ banking giant HSBC not to exit London – where it has been domiciled since 1993, having shifted from Hong Kong. We must bear in mind that this perennial will it/won’t it saga is a de facto endorsement of London’s position as a global financial centre unconditional on the UK’s EU membership. As for the idea that HSBC has the ability to “move many thousands of its staff from London and Paris” were Brexit to occur, one need remind its management that last year 30,000 French nationals received national insurance numbers to work in the UK, a significant number expert in professional services notably finance. By remaining in London, HSBC has shown that it can be close to China even while based in the UK.

As for London’s role in the wealth management business I see little reason to see why as households across the emerging world – particularly those of the behemoths of China and India – seek to invest and insure in their families’ futures, will eschew a long-established and extremely well regulated centre such as London.

Savvas Savouri, chief economist and partner, Toscafund