Brexit: expert discusses ‘importance’ of UK financial services
London was overtaken by Amsterdam as the main European market place in January, as more shares were traded in the Dutch capital. The change, which initially seemed worrying for City traders, comes as Brussels still refuses to recognize most UK regulatory systems as equivalent to its own post-Brexit. Paris and Dublin also gained in volume of trade, with Michel Barnier indicating that the EU would not give up on its demands if a financial services agreement were to be reached with the United Kingdom. But Bank of England Governor Andrew Bailey can find solace in the UK’s currency trading expertise.
Professor David McMillan from the University of Stirling explained: “One of the main segments of the city that is unaffected by Brexit is currency trading.
“While stocks and bonds generally trade in the market where they are issued, currency trading takes place on a global scale – mostly involving pairs of US dollars, followed by pairs involving the euro and yen.
“The UK holds 43% of the global foreign exchange market, and it has grown by six percentage points in three years.
“The second highest is the United States, at 16.5% and down, while the Asian centers of Japan, Hong Kong and Singapore have been mostly static.
London dominates the EU with almost half of global currency exchange despite soaring Amsterdam
Michel Barnier pushes a tough market in financial services
“In forex, London has several important advantages. The location and time zone are halfway between the United States and Asia. It has scope by having such a large number of international banks in a city, as well as the network of support services.
“In comparison, the EU’s expertise is dispersed between centers such as Amsterdam, Frankfurt and Dublin. London also has the infrastructure required for advanced high-frequency commerce, including transatlantic cabling landing stations and data centers.
Professor McMillan argued that London “is likely to continue to dominate this market”, adding that the City can be a “world leader in providing a place where disputes can be resolved and best practices can be monitored and maintained”.
He added that “the key to the future is to maintain and improve standards and regulatory oversight so that large companies continue to have confidence in London as the place to do business.”
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Prime Minister Boris Johnson and Chancellor Rishi Sunak
Professor McMillan concluded in his article for The Conversation: ‘No longer having to coordinate and get along with 27 EU countries should allow the UK to be more agile in this regard, which could be a big advantage in trying to capture emerging areas such as green investment. and fintech.
“This could include the development and regulation of new financial products that allow investors to positively engage in climate change finance and cryptocurrencies.
“It would be a more beneficial approach to moving the financial sector forward than focusing on deregulation in a ‘big bang 2.0’.
“The inevitable reality is that financial services businesses and jobs will continue to be lost due to Brexit. But with a thoughtful, forward-looking approach to managing the industry, there is also plenty of scope for it to bounce back. “
It comes after Professor David Blake argued in an article for BrexitCentral that London is the “crown jewel of the UK economy and the European financial system”.
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Amsterdam overtook London as the main European market center in January
London holds 43% of the global foreign exchange market
He also said the eurozone would become “the single biggest – and most predictable – failure in global financial history.”
Professor Blake wrote: “Why would a sane person allow their financial regulations to be dictated from Brussels once the UK leaves the EU?”
“If Brussels refuses to accept enhanced equivalence or mutual recognition, then the City is more than capable of ‘going it alone’ – as it has done with great success for most of its history and as countries like Switzerland, Hong Kong and Singapore are currently doing. “
The argument over equivalence is brewing, however.
This week, the Bank of England warned the EU that its demands are excessive by international standards.
Governor of the Bank of England Andrew Bailey
Brussels is keen to expand its financial services sector, but appears to fear that the City will cut red tape as this could potentially strengthen London’s already dominant position.
The bloc currently prohibits its financial institutions from trading on the square mile, while a deal is finalized.
Earlier today, Foreign Minister Dominic Raab scoffed at claims the EU was trying to overtake Britain as the world’s leading financial center.
Speaking to the BBC’s Andrew Marr, he ridiculed suggestions that the EU was threatening “one of Britain’s great industries” and warned that such a move could potentially backfire on the bloc.