Amid all the understandable euphoria about the UK-India free trade agreement and the Trump administration’s partial relaxation of tariffs on British exports, Andrew Bailey, governor of the Bank of England, has reminded the nation of a simple truth: that the European Union remains the closest and most valuable of all the UK’s economic relationships, and it must not be neglected.

Although he did not quantify the dynamics of the evolving situation, on any realistic assessment the added value to GDP of all the UK’s post-Brexit deals to date, including with Australia and the trans-Pacific partnership (covering Japan, South Korea, Indonesia and others in the region), will be about a quarter of the permanent losses indicated by leaving the EU.

But it has fallen to Sir Keir to deliver the Brexit “reset” he promised the British people at the last election: on 19 May an ambitious and perhaps historic recasting of relationships is to be unveiled at the next UK-EU summit, the detailed work of relaxing rules on trade, especially in foodstuffs, fisheries and livestock, promises to help hard-pressed British producers who have lost vital export markets in recent years.

Europe remains the key to Britain’s future economic success

Exactly. Some Brexiteers hail the trade deal with the US as a great success and a result of Brexit, but the sad truth is it's like setting your own house on fire and declaring victory because you managed to save the toaster.

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

Looks like it was France that saved the City of London, as they feared Germany more than the UK:

 

"The EU could have used its regulatory powers to shift the business inside its own borders, and kill a lucrative chunk of the City’s business. London’s rivals hoped that, once ‘clearing’ moved to a different city, there would be a powerful incentive for banks and brokers to follow suit. 

As it turns out, however, while some trades will have to be transferred to EU clearing houses, the bulk of them will be allowed to stay in London. The French, somewhat unexpectedly, sided with the UK because they were worried that, if the business moved, it would go to Frankfurt rather than Paris. That would make the German city, already home to the European Central Bank, the key hub for the whole of the continent. It turns out that France may well fear Germany more than it hates Brexit: even helping the British was better than allowing its neighbour to claim power over the bloc’s clearing houses. "

 

https://www.spectator.co.uk/article/the-city-of-london-has-france-to-thank-for-its-brexit-win/

37 minutes ago, Cameroni said:

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

I'm guessing because there were grown-ups present in both places that realized that Europe would be so much worse off with a financially destitute Britain, which would probably have been the case if London as a financial center would have collapsed.

32 minutes ago, Cameroni said:

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

 

I'm not sure whether the EU could have (or can) destroyed the City of London, and less convinced whether it would be in its' best interests to do so.

 

Financial services account for +/-10% of UK GDP, and the destruction of this sector would obviously severely damage the UK. Why would the EU welcome this outcome? They would have to deal with the effects of having a large failed state on its' doorstep.

 

An interesting academic discussion on the effects of Brexit on the City of London can be found here:

 

https://www.sciencedirect.com/science/article/pii/S2949694224000051#:~:text=The only significant financial power that the,shared with the EU was financial regulation.&text=Despite some relocations from London%2C Brexit has,to London as an international financial centre.

In 2023, the UK exported goods and services worth £348bn to the EU, 41.2 per cent of the UK total, the equivalent US number was £179.4bn or 21.2 per cent of total exports.

Goods exports to the EU remain below their pre-pandemic and Brexit levels, last year they were 18 per cent below the 2019 number in real (inflation-adjusted) terms. Brexiteers argued that exiting the EU would catalyse a flowering of trade with non-EU countries boasting whizzy fast-growing economies, such as those in South East Asia; however, exports of goods to non-EU countries in 2024 were also 14 per cent below their 2019 level in real terms.

Services have done better. Sales of these to both EU and non-EU countries fell in 2020 but have since bounced back. In 2024, UK exports of services to the EU were 19 per cent above their 2019 level in real terms, exports to non-EU countries were 23 per cent higher. 

Voices: If the UK is to grow, Labour must look towards the real trade prize

1 hour ago, Cameroni said:

Looks like it was France that saved the City of London, as they feared Germany more than the UK:

 

"The EU could have used its regulatory powers to shift the business inside its own borders, and kill a lucrative chunk of the City’s business. London’s rivals hoped that, once ‘clearing’ moved to a different city, there would be a powerful incentive for banks and brokers to follow suit. 

As it turns out, however, while some trades will have to be transferred to EU clearing houses, the bulk of them will be allowed to stay in London. The French, somewhat unexpectedly, sided with the UK because they were worried that, if the business moved, it would go to Frankfurt rather than Paris. That would make the German city, already home to the European Central Bank, the key hub for the whole of the continent. It turns out that France may well fear Germany more than it hates Brexit: even helping the British was better than allowing its neighbour to claim power over the bloc’s clearing houses. "

 

https://www.spectator.co.uk/article/the-city-of-london-has-france-to-thank-for-its-brexit-win/

It's not the only (and main) explanation. There were also issues of higher cost for banks, lack of choice for bank customers, and regulatory supervision.

Here's the Politico article cited by the Spectator as source.

https://www.politico.eu/article/france-helped-britain-keep-euro-clearing-london-brexit/

 

Interestingly enough, the current policy is set to expire in June 2025, which may partially explain Starmer's alacrity.

4 hours ago, candide said:

It's not the only (and main) explanation. There were also issues of higher cost for banks, lack of choice for bank customers, and regulatory supervision.

 

Indeed. It looks like the German regulators' abysmal past performance scared off the French, quite rightly. But the biggest reason appears to have been that neither the French nor the German banks wanted to stop using UK clearing houses, ostensibly due to cost, but those banks are so intertwined with London, many of their main personnell would have worked in London, that they saw no point in castrating the City.

 

It would have required someone like Trump, to push through the reform required, or else the interested parties water down the intended policies to suit themselves.

 

Of course the EU can always pull the trigger on this in the future, and in any event settlement is not the only City of London slice of business the EU could take.

 

People who say regulation doesn't matter, don't know the history of the Eurobond. It matters a lot.

5 hours ago, RayC said:

 

I'm not sure whether the EU could have (or can) destroyed the City of London, and less convinced whether it would be in its' best interests to do so.

 

Financial services account for +/-10% of UK GDP, and the destruction of this sector would obviously severely damage the UK. Why would the EU welcome this outcome? They would have to deal with the effects of having a large failed state on its' doorstep.

 

An interesting academic discussion on the effects of Brexit on the City of London can be found here:

 

https://www.sciencedirect.com/science/article/pii/S2949694224000051#:~:text=The only significant financial power that the,shared with the EU was financial regulation.&text=Despite some relocations from London%2C Brexit has,to London as an international financial centre.

 

The EU could have taken away most of the City of London's business, had it wanted to do so. Clearly it would be in Frankfurt's interest to establish itself above the City of London as Europe's main financial market place. 

 

The UK looks more and more like a failed state anyway, but the loss of the financial services sector would not be mortal, the UK has pharma and many other sectors still for a prolonged decrepit decline.

 

The UK's decline would not affect the EU all that much.

 

The EU could regulate away a lot of the City's business, and they can still do so in the future, if they ever decide to do it.

Duh!

6 hours ago, bannork said:

 Amid all the understandable euphoria about the UK-India free trade agreement and the Trump administration’s partial relaxation of tariffs on British exports, Andrew Bailey, governor of the Bank of England, has reminded the nation of a simple truth: that the European Union remains the closest and most valuable of all the UK’s economic relationships, and it must not be neglected.

Although he did not quantify the dynamics of the evolving situation, on any realistic assessment the added value to GDP of all the UK’s post-Brexit deals to date, including with Australia and the trans-Pacific partnership (covering Japan, South Korea, Indonesia and others in the region), will be about a quarter of the permanent losses indicated by leaving the EU.

But it has fallen to Sir Keir to deliver the Brexit “reset” he promised the British people at the last election: on 19 May an ambitious and perhaps historic recasting of relationships is to be unveiled at the next UK-EU summit, the detailed work of relaxing rules on trade, especially in foodstuffs, fisheries and livestock, promises to help hard-pressed British producers who have lost vital export markets in recent years.

Europe remains the key to Britain’s future economic success

They won at 34%, the lowest win ever recorded, His brexit reset will be the reason he loses very soon.

18 hours ago, Cameroni said:

 

The EU could have taken away most of the City of London's business, had it wanted to do so. Clearly it would be in Frankfurt's interest to establish itself above the City of London as Europe's main financial market place. 

 

Not so for any number of reasons.

 

Many EU financial centres e.g Frankfurt, Amsterdam, Paris have tried - and largely failed - to entice financial institutions to relocate from the City of London. This highlights the first reason why a major relocation has not occurred: Intra-EU competition. A second reason is that many (most?) of the major financial institutions already had a presence in continental Europe, therefore the City's loss of passporting rights meant that the impact was limited: Some functions were relocated but the hub remained in London. Thirdly, London has a dominant position in some markets e.g. foreign exchange trading where 38% of global transactions are conducted. Fourthly, the intellectual expertise and infrastructure cannot simply be replicated overnight in Frankfurt, etc: There is also the 'human element'. It appears that US financial executives simply prefer London as a city to its' continental counterparts.

 

I could go on but you get the gist.

 

18 hours ago, Cameroni said:

The UK looks more and more like a failed state anyway, but the loss of the financial services sector would not be mortal, the UK has pharma and many other sectors still for a prolonged decrepit decline.

 

Again, not true.

 

There can be no doubt that the UK has problems - which country doesn't? - but it is far from a failed state and it is - contrary to what some of the ex-pat doom mongers on ASEAN now might suggest - still a fairly decent place to live for the majority of people.

 

However, having said that the loss of a significant proportion of the financial service sector would be a major blow to the country as financial related services contribute about 12% to the UK's total economic output (gross value added), or £275 billion. This represents around 3.4% of UK GDP and contributed 10.1% of total UK tax receipts (Source: Google AI).

 

18 hours ago, Cameroni said:

The UK's decline would not affect the EU all that much.

 

Yet again, not the case.

 

Notwithstanding the fact that the 'transfer' of functions may not be a simple and smooth process, as I stated in the previous paragraph the effect that this would have the UK economy would be significant, and the knock-on effect for the EU economy sizeable; 13% (+/-$330bn) of EU exports and 9% (+/-$180bn) of EU imports go to/ come from the UK. A reduction of say, 10%,  in these figures - due to the loss of purchasing power on the part of the British consumer/ manufacturer would be significant for the EU.

 

18 hours ago, Cameroni said:

The EU could regulate away a lot of the City's business, and they can still do so in the future, if they ever decide to do it.

 

As I showed above, if the EU were to regulate the UK out of existence, it would be a case of cutting off their nose to spite their face. I credit them with more savvy than that.

19 hours ago, frank83628 said:

They won at 34%, the lowest win ever recorded, His brexit reset will be the reason he loses very soon.

 

55% of people in the UK now think that Brexit was a mistake, compared with 30% who think it was the right thing to do. 

 

If Starmer loses very soon it won't be because of a Brexit reset.

1 hour ago, RayC said:

 

55% of people in the UK now think that Brexit was a mistake, compared with 30% who think it was the right thing to do. 

 

If Starmer loses very soon it won't be because of a Brexit reset.

 

Only 55%, that sounds low for hindsight review after the governments failure to "Get BREXIT Done" properly.

1 hour ago, RayC said:

 

55% of people in the UK now think that Brexit was a mistake, compared with 30% who think it was the right thing to do. 

 

If Starmer loses very soon it won't be because of a Brexit reset.

We all know that on the street polls can be swayed each direction depending how many of each side you ask.

Hardly even worth quoting 

1 hour ago, RayC said:

Many EU financial centres e.g Frankfurt, Amsterdam, Paris have tried - and largely failed - to entice financial institutions to relocate from the City of London. This highlights the first reason why a major relocation has not occurred: Intra-EU competition.

 

The Franco German competition certainly helped the UK with settlements, but there hasn't really been a proper drive to attack the City, not with amateurish campaigns to entice banks away, but a proper drive to establish regulations that would destroy most of the City's business, which actually heavily depends on access to the EU.

 

Back in the days before Brexit there was certainly a lot of fear of losing passporting rights.

 

'Significant' risk to UK firms if passporting rights lost after Brexit

https://www.theguardian.com/politics/2016/sep/20/passporting-rights-brexit-uk-firms-fca-eu

 

But again the EU showed leniency.

 

Nevetheless, even without any concerted European effort Brexit has taken its toll. Amsterdam has now overtaken London as the largest share trading centre. IPO listings in the UK are down. However, none of the European competitors can offer a volume like London, so none are serious competitors for IPOs.

 

https://www.nytimes.com/2024/05/28/business/london-financial-center-ipo-europe.html

 

Expertise, yes, there is no doubt the City has far greater expertise than Frankfurt, Paris or Amsterdam combined, one need only look at the failures of the German regulators in recent history. And people do prefer London to Frankfurt and Paris for various reasons.

 

1 hour ago, RayC said:

still a fairly decent place to live for the majority of people.

 

Only some pockets like London. Go to Harlow and  you'll think you're in a dystopian Horror movie.

 

1 hour ago, RayC said:

This represents around 3.4% of UK GDP and contributed 10.1% of total UK tax receipts

 

Yes, but a weakening of the City need not mean it does no business at all,  just less than Frankfurt. Besides the UK has pharma and many other sectors that are still employing fair numbers.

 

1 hour ago, RayC said:

of EU imports go to/ come from the UK. A reduction of say, 10%,  in these figures - due to the loss of purchasing power on the part of the British consumer/ manufacturer would be significant for the EU.

 

Well, we see in the US that such losses can be born, especially by larg markets like the EU and the US. Neither really need the UK all that much.

 

 

 

1 hour ago, Cameroni said:

 

The Franco German competition certainly helped the UK with settlements, but there hasn't really been a proper drive to attack the City, not with amateurish campaigns to entice banks away, but a proper drive to establish regulations that would destroy most of the City's business, which actually heavily depends on access to the EU.

 

An attempt to stifle the City of London by regulation by the EU might also have the undesired effect of driving US institutions away. The only winner then will be New York.

 

1 hour ago, Cameroni said:

Back in the days before Brexit there was certainly a lot of fear of losing passporting rights.

 

'Significant' risk to UK firms if passporting rights lost after Brexit

https://www.theguardian.com/politics/2016/sep/20/passporting-rights-brexit-uk-firms-fca-eu

 

But again the EU showed leniency.

 

There certainly was a lot of fear about passporting, but Armageddon has been avoided (up to now).

 

The EU realises that it is not in their best interests for the City of London to fail.

 

1 hour ago, Cameroni said:

Nevetheless, even without any concerted European effort Brexit has taken its toll. Amsterdam has now overtaken London as the largest share trading centre. IPO listings in the UK are down.

 

Yes, there has been some peripheral damage.

 

1 hour ago, Cameroni said:

 

However, none of the European competitors can offer a volume like London, so none are serious competitors for IPOs.

 

https://www.nytimes.com/2024/05/28/business/london-financial-center-ipo-europe.html

 

Expertise, yes, there is no doubt the City has far greater expertise than Frankfurt, Paris or Amsterdam combined, one need only look at the failures of the German regulators in recent history. And people do prefer London to Frankfurt and Paris for various reasons.

 

We agree.

 

1 hour ago, Cameroni said:

 

Only some pockets like London. Go to Harlow and  you'll think you're in a dystopian Horror movie.

 

I'd say it was the reverse. There are pockets of severe decay but most places are fine. The major conurbations such as London and Manchester are much better places to live now compared with 40 years ago.

 

1 hour ago, Cameroni said:

 

Yes, but a weakening of the City need not mean it does no business at all,  just less than Frankfurt. Besides the UK has pharma and many other sectors that are still employing fair numbers.

 

For reasons which I have stated previously, I don't believe that there will be a major relocation of financial services from London to Frankfurt. However, playing devil's advocate, if this were to occur the effect would be huge. Why would major financial institutions feel the need to keep a presence in London? In all probability, London would become akin to what Leeds is now and provide a few niche financial services.

 

Pharma is an important industry in the UK but its' presence would do nothing to mitigate against the effects of the demise of the City of London.

 

1 hour ago, Cameroni said:

 

Well, we see in the US that such losses can be born, especially by larg markets like the EU and the US. Neither really need the UK all that much.

 

 

I don't doubt for one minute that the UK needs the EU and US more than they need us, however, to casually dismiss a major downturn in the UK economy as insignificant - especially to the EU - is over-simplifying matters.

 

What we see from events in the US is that even the world's largest economy cannot dictate the terms under which world trade is conducted.

2 hours ago, frank83628 said:

We all know that on the street polls can be swayed each direction depending how many of each side you ask.

Hardly even worth quoting 

 

Nonsense. Surveys are not foolproof but reputable organisations such as YouGov use valid sampling techniques.

 

You can't dismiss the findings of a survey simply because you don't like its' findings.

Europe is broke, and dying. 

3 minutes ago, RayC said:

An attempt to stifle the City of London by regulation by the EU might also have the undesired effect of driving US institutions away. The only winner then will be New York.

 

Well, let's think about this, the US institutions prefer London due to language. However, if they had to follow regulations that make their business in London impossible or too expensive, would they relocate to Paris or Frankfurt or just go back to New York? Probably Frankfurt or Paris. New York has already won really, it's purely a battle for second place.

 

Perhaps the bigger challengers will not be Frankfurt or Paris, but Hong Kong, Dubai or Singapore.

 

29 minutes ago, Cameroni said:

 

Well, let's think about this, the US institutions prefer London due to language. However, if they had to follow regulations that make their business in London impossible or too expensive, would they relocate to Paris or Frankfurt or just go back to New York? Probably Frankfurt or Paris. New York has already won really, it's purely a battle for second place.

 

Perhaps the bigger challengers will not be Frankfurt or Paris, but Hong Kong, Dubai or Singapore.

 

 

Maybe in time Asian financial centres will gain at London's expense but, in the short/medium term, London's position as the world's second most important financial centre looks reasonably secure.

42 minutes ago, RayC said:

 

Maybe in time Asian financial centres will gain at London's expense but, in the short/medium term, London's position as the world's second most important financial centre looks reasonably secure.

 

Well, yes, because the EU is not putting in regulations that make London unviable as a financial market place. But they could do so at any time should they so wish.

3 minutes ago, Cameroni said:

 

Well, yes, because the EU is not putting in regulations that make London unviable as a financial market place. But they could do so at any time should they so wish.

 

If the EU increases financial regulation it will apply equally to the US financial sector. Far from driving business from London to Frankfurt, it may well either aid London's position or, alternatively, lead to US financial companies downsizing their European operations. 

 

Clearly, neither outcome is in Frankfurt's best interests.

8 hours ago, RayC said:

 

If the EU increases financial regulation it will apply equally to the US financial sector. Far from driving business from London to Frankfurt, it may well either aid London's position or, alternatively, lead to US financial companies downsizing their European operations. 

 

Clearly, neither outcome is in Frankfurt's best interests.

 

With settlements now a very moderate deal was reached, the EU only requires a modest percentage of settlements to be made in the EU. However, the EU could have mandated a far greater precentage of settlements has to be made in the EU. That would have substantially reduced the business the City does in terms of settlements. US banks located in London would have had to use EU clearing houses, they'd have had no choice. So the major UK clearing houses would not have had that business anymore. It would not have applied "equally" to the US sector, because US clearing houses in the US would not have been affected, only the UK's clearing houses would have. Could some US banks in the UK have decided the extra cost of Frankfurt clearing houses would make them cease operations in Europe alltogether, yes, but extremely unlikely. They'd just have paid the Frankfurt fees for settlements.

 

This is what I mean, this would have benefitted Frankfurt as a financial centre.

 

Equally with foreign exchange business btw, the EU could mandate a few things and that business would migrate from London to Frankfurt or Paris, because it would have to due to new regulations.

 

10 hours ago, RayC said:

 

Nonsense. Surveys are not foolproof but reputable organisations such as YouGov use valid sampling techniques.

 

You can't dismiss the findings of a survey simply because you don't like its' findings.

I seem to remember people complaining that a win at 51% wasn't good enough and there should be a 2nd vote, but here 55% in a poll is proof People didint want Brexit.

 

People voted for brexit so as not to be goverened by the bureaucratic BS in Brussels, the UK can still trade with whoever.

It was the weak remainer politicians that dragged their heels and made the UK look weak by trying to undermine the whole process, now stamer wants to reset it and waste all that time and money, then what, Farage wins next and reinstate it.

 

Britian is a basket case because it isnt British anymore. All the real Brits live overseas. 

On 5/10/2025 at 3:48 PM, Cameroni said:

Europe, following Brexit, could have completely destroyed the City of London as a viable financial market place, but instead showed major leniency, allowing equivalence of rules to prevail.

 

Why Frankfurt and Paris did not take the chance to destroy London as a competitor is a mystery.

No, it's not s mystery at all.

They are just not so narrow minded as the Brexiteers.✌️

6 minutes ago, newbee2022 said:

They are just not so narrow minded as the Brexiteers.

 

It has nothing to do with broadmindedness in Frankfurt or Paris. 

 

It's just that German and French banks are used to doing business in London, and  to force them not do it, would require a Trump and neither Germany nor France have one. Yet.