London retains global finance throne amid Brexit chaos

[snoop1130]

London retains global finance throne amid Brexit chaos

By Andrew MacAskill, Sinead Cruise, Huw Jones

 

The Canary Wharf financial district is seen from the construction site of 22 Bishopsgate in London, Britain June 25, 2019. REUTERS/Hannah McKay/Files

 

LONDON (Reuters) - From the pinnacle of the City of London’s largest skyscraper, Stuart Lipton is wagering a $1.2 billion bet that the British capital remains a master of the international financial universe no matter what happens with Brexit.

 

The 76-year-old property developer is not alone. Bankrolled by a host of global investors, including France’s Axa (AXAF.PA), his big-ticket gamble in London’s financial district is - so far - on the money.

 

The cataclysmic warnings during the 2016 referendum that London would lose its financial throne if it voted to leave the European Union (EU) have, so far, been proven wrong. London is still the world’s banker, only bigger by some measures.

 

“London is extraordinarily resilient and its future as a finance centre is secure because what we have here is unique,” Lipton told Reuters on the 61st floor of 22 Bishopsgate, set to become western Europe’s second tallest skyscraper when it opens next year.

 

In the year to June, London has attracted more cross border commercial real estate investment than any other city. It has overtaken New York as destination for fintech investment and it has increased its dominance of the world’s $6.6 trillion daily foreign exchange market.

 

Since the vote to leave the EU, Britain has leapfrogged the United States to become the largest centre for trading interest rate swaps, despite calls by ex-French President Francois Hollande to end London’s dominance in clearing euro-denominated derivatives.

 

That London has expanded its influence as an international finance centre is one of the biggest riddles of the United Kingdom’s tortuous three year Brexit crisis.

 

The city’s standing ensures the United Kingdom keeps one of its last big chips at the top table of world politics just as it splits from the EU.

It also means EU companies will still come to London to raise finance outside the bloc after Brexit, a fact not lost on Wall Street heavyweights such as Goldman Sachs (GS.N) and JP Morgan (JPM.N).

 

Just a mile away from 22 Bishopsgate, Goldman opened its new 1 million square foot European headquarters - complete with mothers’ rooms and wildflowers on the roof - in July, three years on from the 2016 referendum.

 

Largely abandoned by the British government during Brexit talks, ten senior industry officials told Reuters London’s financial services sector has grown since 2016 because there is no realistic competitor in its time zone.

 

And high-rolling bankers are too attached to its Anglo-Saxon, work-hard, play-hard culture.

 

The chief executive of the British division of one of Europe’s largest banks said although some business will move to the EU, most senior bankers will be reluctant to leave London. He would consider taking a 20% pay cut to remain in the city.

 

“If you are an Italian banker, who moved out to London 20 years ago, and your kids go to private school around the corner then you are not going to move to Frankfurt,” he said.

 

“MASTER OF THE UNIVERSE”

 

A global hub for trading, lending and investing, London is the largest net exporter of financial services in the world, with the EU accounting for a quarter of the business.

 

The 2016 referendum shocked many of the masters of London’s financial universe, triggering the biggest one-day fall of the pound since the era of free-floating exchange rates was introduced in the early 1970s.

 

But so far, most major financial institutions have opted against moving large numbers of people and activities until the loss of access to the EU’s lucrative single market is confirmed.

 

Banks, insurers and asset managers have shifted over a trillion euros of assets such as derivatives and bonds from London to the continent and opened new EU hubs as a hedge against London suddenly being cut off from the bloc if Britain exits the EU without a formal agreement.

 

The Bank of England estimates around 4,000 people may have moved by the time Britain has exited the EU. But the key decisions are still taken in London.

 

Reuters contacted JP Morgan and Goldman, and rivals Citi (C.N), Bank of America (BAC.N), UBS (UBSG.S), Morgan Stanley (MS.N), Credit Suisse (CSGN.S) and Deutsche Bank (DBKGn.DE), to seek details on how a ‘no deal Brexit’ might accelerate the transfer of resources and activities from London.

 

All banks said they were prepared for a no-deal Brexit, and had been since the first quarter.

 

Earlier this year, Morgan Stanley’s chief executive, James Gorman, said that he scarcely worried about Brexit. “That’s not in my top 200 issues,” he said.

 

British data shows the total number of people employed in the City between 2016 and 2018 overall rose by 31,000, though the total number of people employed specifically in banking and insurance is down 3,000 over the period.

 

It is not clear how much of that drop is due to Brexit and how much is due to new regulations or structural changes, such as higher numbers of tech specialists at lenders while traditional banking jobs shrink.

 

Initial estimates of potential job losses ranged from about 30,000 roles within a year of Britain leaving the EU, estimated by the Brussels-based Bruegel research group, to up to 75,000 by 2025 by Oliver Wyman.

 

Oliver Wyman said they stand by their predictions because it is important to distinguish between job losses on the first day of Brexit and over the longer term. The final number will depend upon the level of market access, which is not clear yet.

 

Bruegel did not respond to a request for comment.

 

GLACIAL MELT?

 

Financial capitals such as London have remarkable longevity and their rise and fall typically happens at a glacial pace, said Youssef Cassis, a professor of economic history who specialises in financial centres.

 

“There is no precedent for decoupling between a major economic power- in this case the European Union- and its financial centre, London,” he said.

 

Some key activities have moved out of London ahead of Brexit. Euro zone government bond and repurchase agreements trading worth around 230 billion euros a day, along with clearing, switched to Amsterdam, Milan and Paris earlier this year.

 

London-based CBOE Europe, the EU’s largest share trading venue, began trading euro shares at its new Amsterdam hub at the start of October.

 

Nicolas Mackel, who heads a body promoting Luxembourg’s financial centre, said it would be a shift in activities and not jobs that will affect London most.

 

“It’s not between now and Christmas you have to look, but on a five, 10, 15 and 20 year framework. It’s a false comfort that you are providing by only focusing on jobs,” Mackel said.

 

After Brexit the $15.9 trillion EU 27 economy will still be reliant on a financial capital outside its borders, which could be politically hard for Brussels to stomach indefinitely.

 

One European Commission official, speaking on condition of anonymity, told Reuters that the EU had no intention of smothering Britain’s financial sector to accelerate its own plans for an EU capital markets union.

 

But there is scepticism in the market about the longevity of such pledges.

 

“Why should one expect the EU to give an economic answer to what is a political challenge?” said Xavier Rolet, former head of London Stock Exchange and CEO of investment manager CQS.

 

“I would expect them to respond politically, even if those answers are not necessarily in the best economic interests of EU-based investors, corporates and banks.”

 

Rolet, who said in the aftermath of the referendum that half of all finance jobs in London may disappear if derivatives clearing left the capital, said it was too early to assess the implications of Brexit.

 

“I do stand by my statement,” he said of the potential job losses.

 

-- © Copyright Reuters 2019-10-15

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[nauseus]

What a nice story!

[bristolboy]

The loss of EU business won't happen quickly. Over time, the odds are it will be, not death, but impairment by a thousand cuts. Finance is a highly technical business but also a highly regulated one. The shift should happen slowly.

[Chomper Higgot]

The chaos hasn’t yet started.

 

All the financial institutions in London still have tariff free access to the rest of the EU.

[anterian]

One assumption is that the EU will continue to exist, in fact it seems increasingly unstable. 

[sanemax]

Is London still located in the U.K ?

I read reports that everyone and all business have moved elsewhere to Europe .

  Didnt all the banks in London  move to Europe and take all their money with them ?

[ivor bigun]

One assumption is that the EU will continue to exist, in fact it seems increasingly unstable. 

Your right,the only ones who want to join are those countrys that take,not ones that give,money that is ,the German people will soon get fed up with it.

Sent from my SM-A720F using Thailand Forum - Thaivisa mobile app

[soalbundy]

11 hours ago, anterian said:

One assumption is that the EU will continue to exist, in fact it seems increasingly unstable. 

That has been said since its inception but here we are. The pound and business confidence rises and falls according to the decisions of the EU not the other way round, the UK is a terrier snapping at the EU's heels hoping it won't be kicked.

[ivor bigun]

That has been said since its inception but here we are. The pound and business confidence rises and falls according to the decisions of the EU not the other way round, the UK is a terrier snapping at the EU's heels hoping it won't be kicked.

Well this "terrier" was a major contributer,so when we leave and you only have one leg to stand on ,kicking anything will be a problem.

Sent from my SM-A720F using Thailand Forum - Thaivisa mobile app

[soalbundy]

12 hours ago, sanemax said:

Is London still located in the U.K ?

I read reports that everyone and all business have moved elsewhere to Europe .

  Didnt all the banks in London  move to Europe and take all their money with them ?

No that isn't true, a lot of banks and insurances now have operations set up in the EU "just in case" I read a report this morning stating that London has in fact increased its operations and is bigger than NY concerning crossborder property deals and foreign exchanges although the Dutch are crowding in on some Euro exchanges. The general understanding is that London will continue to be the world's money center for many years to come, the cutting of the umbilical cord between the EU and London could take up to 20 years if at all although for political reasons the knife will always be ready but who knows we will probably be back in by then.

[VocalNeal]

If the powers that be in London thought the world would end if Brexit goes ahead, it would have been stopped long ago. However there is always opportunity in uncertainty.????

[JonnyF]

Meanwhile, Remainers everywhere are huddled up in the corner, tinfoil hats firmly in place, hundreds of tins of canned food in the drawers, preaching project fear to anyone still listening, waiting for the sky to fall ????.

 

[bert bloggs]

Love the picture of the two idiots ,one just stupid and the other just greedy.

[soalbundy]

1 hour ago, VocalNeal said:

If the powers that be in London thought the world would end if Brexit goes ahead, it would have been stopped long ago. However there is always opportunity in uncertainty.????

I think it is rather like WW1, it has its own dynamic, there are some of the prolls who love the idea because of the adventure and glory of it all, then there are economists, politicians and the higher ranks of civil service who see the horror of it all unfolding but unable to stop it and then we have the heavy industry (now missing) and armaments factories rubbing their hands in glee at the profits to be made. Nothing lasts forever of course and after the petty machinations of man have ended everything is swept clean and rationalized until the next debacle.

[soalbundy]

2 hours ago, ivor bigun said:

Well this "terrier" was a major contributer,so when we leave and you only have one leg to stand on ,kicking anything will be a problem.

Sent from my SM-A720F using Thailand Forum - Thaivisa mobile app
 

It will be like a marriage, even after a divorce you pay in one way or another.

[Baerboxer]

16 hours ago, bristolboy said:

The loss of EU business won't happen quickly. Over time, the odds are it will be, not death, but impairment by a thousand cuts. Finance is a highly technical business but also a highly regulated one. The shift should happen slowly.

 

We'll see.

 

Many years ago, over 25, a Chinese PhD professor of economics told me that the Chinese vision for the future financial "capitals" of the world were Shanghai, London and New York. She dismissed Frankfurt and Paris as non contenders in reality.

 

She maintains the same view. China typically take a much longer view than Westerners. 

[Baerboxer]

16 minutes ago, soalbundy said:

It will be like a marriage, even after a divorce you pay in one way or another.

 

And that goes both ways in this case. Which is why a great many people don't want it, on both sides.

 

Having said that, assuming the UK wasn't leaving. At some point the harmonization of law across the EU members and legal systems will have to be addressed. The current EU leadership will need this as they march towards federalism. The UK (apart from Scotland) and Ireland have common law systems. The rest codified law systems mostly based on Napoleonic law. France will always champion codified as apart from anything else it's always unwilling to change anything! That would not be unacceptable to most of the UK and not sure Ireland will readily accept it.

 

That wasn't even mentioned during the Brexit campaign, as both sides were too busy with their fake news, lies and propaganda!

 

 

[Grusa]

You can be sure that no matter how Brexit goes, there will be fat cats rubbing their hands in glee as they trade bulk currency.

[overherebc]

16 hours ago, sanemax said:

Is London still located in the U.K ?

I read reports that everyone and all business have moved elsewhere to Europe .

  Didnt all the banks in London  move to Europe and take all their money with them ?

Must have done. Local bar owner told me last night.

[Knocker33]

20 hours ago, sanemax said:

Is London still located in the U.K ?

I read reports that everyone and all business have moved elsewhere to Europe .

  Didnt all the banks in London  move to Europe and take all their money with them ?

I have a couple of European bank accounts and they have recently located to London. So maybe it's the reverse 

[bkk_mike]

Bank regulations only cover certain people, and will only cover where you're specifically dealing with European customers directly. (or possibly Euro settlements - but then you have the problem that anything they do to block Euro settlements in London would also block Euro settlements in New York, Hong Kong, Tokyo, etc.)

 

The people actually dealing with European customers have to move. (Generally some of the traders, some of the higher up managers, and some of the risk staff - whatever is required for the regulator in the country they move to in order to get the required banking licence.)

 

But nobody's moved the support staff (yet), because anyone in those areas that could be replaced easily was already outsourced to India or the Phillipines, or Singapore, or Warsaw... because there was no requirement for them to be physically in the EU anyway.

 

What will probably happen is, as traders look to hire local support staff, that more hiring will be in Europe, and as someone leaves in London, they'll maybe get replaced by someone in Frankfurt or Luxembourg. But if they're working for (for example) a US bank, they'll need to speak English, which (maybe not in Luxembourg, but definitely in Germany) will reduce the possible candidate list.

 

The biggest issue is that, essentially, nowhere in Europe, outside London, is big enough to take in all the jobs..., so there is no obvious winner inside the EU. So the banks will carry on taking a wait and see attitude for the people that they don't HAVE to move. This is, after all, why, after the Single Market was formed in 1993, all the financial jobs in the EU moved to the UK in the first place - because London was the obvious Financial Centre of the EU...

 

But remember - Brexit hasn't actually happened yet...

 

https://www.independent.co.uk/news/business/news/jpmorgan-brexit-plans-job-move-london-eu-luxembourg-no-deal-a8532691.html

 

Edited October 16, 2019 by bkk_mike
Typo

[StreetCowboy]

Brexit will be great for the British banking industry; we’ll be free from the self-righteous, interfering bureaucrats and policemen of Europe chasing hot money, and our launderettes will be running 25 hours per day until the kleptocrats in Russia and elsewhere run out of money, or we get shut down because people won’t accept grey money any more.  Luckily our Rees-Mogg and the rest of our elders and betters will have sufficient clean money washed away upon sunnier shores, and no-one need worry but our children and their children.

[sanemax]

4 hours ago, StreetCowboy said:

Brexit will be great for the British banking industry; we’ll be free from the self-righteous, interfering bureaucrats and policemen of Europe chasing hot money, and our launderettes will be running 25 hours per day until the kleptocrats in Russia and elsewhere run out of money, or we get shut down because people won’t accept grey money any more.  Luckily our Rees-Mogg and the rest of our elders and betters will have sufficient clean money washed away upon sunnier shores, and no-one need worry but our children and their children.

Is thaT satire ?

[Scott]

Off-topic post removed.

 

[kingdong]

On 10/15/2019 at 12:43 PM, Chomper Higgot said:

The chaos hasn’t yet started.

 

All the financial institutions in London still have tariff free access to the rest of the EU.

Didn,t germany,sorry the eu want to impose taxes on Britain's financial service industries?

[JAG]

29 minutes ago, kingdong said:

Didn,t germany,sorry the eu want to impose taxes on Britain's financial service industries?

I very much doubt whether France, Germany, Italy, not to mention the overarching governance of the EU, would be able to resist imposing tax regimes on financial businesses moving to Paris, Frankfurt or Milan. At least a "windfall tax" which would inevitably become a permanent revenue stream. 

 

I suspect that International Financial business also knows that.

 

"Tobin Tax" and "We can't accept a Singapore in the North Sea" are two phrases we can expect to hear more...

Edited October 17, 2019 by JAG

[bert bloggs]

22 hours ago, soalbundy said:

It will be like a marriage, even after a divorce you pay in one way or another.

My first wife ,didnt get paid ,she stole ,