It would be foolish for the UK to be complacent about London’s role as an international financial centre. A bad regulation or piece of policy can send financing moving location overnight and there are plenty of examples.
The Eurobond market was created in London because of US restrictions on dollar deposits in the 1960s. Nordea is currently considering moving its headquarters out of Stockholm over proposals to raise the amount the bank pays into Sweden’s resolution fund.
With the UK set to leave the European single market, whatever agreement is reached for financial services, it will not be as good as passporting rights under single market membership. Some activities and some jobs are bound to move.
But of the factors keeping international banking in London (or anywhere for that matter) – language, legal system in terms of shareholders and creditors rights, tax and employment codes, depth of the markets, etc – the outstanding one is talent and where talent wants to live.
This is why some commentators have said that New York, not other European destinations, will be the big winner from Brexit. American banks may conclude that if they are going to operate outside the European single market they may as well do it in their home city, which also has a talent pool to match London’s.
Swiss bankers say that finding asset managers in Zurich is tough but in London they have plenty to choose from. Assuming that UK prime minister Theresa May’s migration controls only impact at the low skills end of the labour market, UK-based banks will continue to be able to draw on a local, a European and indeed an international talent pool.
Since the UK referendum, the most active location in trying to attract investment from London has been Paris. There was a witty 'Tired of the fog, try the frogs' advertising campaign. At an event held at London’s glitzy Shard, the president of the Paris region, Valérie Pécresse, in a pitch for the lifestyle vote, asked: “When was the last time you took your partner off for a weekend in Frankfurt?”
This may give Paris higher marks than Frankfurt but the hardest people to persuade of the virtues of Paris as a financial centre are French bankers living in London. They are unconvinced that in terms of tax, employment and commercial law, France has moved sufficiently far to make it attractive. So that’s one pool of a talent that is not going home.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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