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I am optimistic about Brexit’s impact on the City, and that’s because the City thrives on innovation and change.

Here are two examples. The City created what is now the international bond market in 1963. Sigmund Warburg persuaded Autostrade to issue a bond outside Italy denominated in dollars. The issue was a huge success and the eurodollar market was born. Then in 1986, in what became known as Big Bang, the City dismantled the old-style London Stock Exchange as it was (a sort of small members’ club) and turned it into what is now the world’s top international equity market. There’s more in the book on both.

It’s this preparedness to change and innovate that will ensure the City stays at the cutting edge. The City attracts the brightest and ablest minds and it’s this intellectual powerhouse that keeps the City changing and developing.

However, there will be short-term impacts. The EU is not going to allow banks in London to continue to do business in the EU from small outposts. So they have had to set up fully capitalised subsidiaries – and are moving people who would have otherwise worked in London to do so.

But the overall numbers aren’t that big. The total job loss may amount to about 70,000 (10% of the City’s workforce and the same number as were lost between 2010 and 2015 through natural attrition). In fact there is likely to be a greater impact in places like Birmingham and Bournemouth to which a lot of back office operations have been outsourced.

The regulatory landscape will be complex. The regulation of banks does two things. It stops them from taking on risks that could destroy them and it stops them from defrauding customers. At the point at which the UK leaves the EU the two will have identical regulatory frameworks. If they continue to develop in parallel then UK-based banks should be able to do some business in the EU. But retail products – such as insurance and investment funds – will undoubtedly be affected. However, the City is mainly a wholesale (business-to-business) market. Big companies from Europe will still come to the City to raise money.   

London won’t lose its status. That’s because London is in a very odd position. It is by no means the largest financial centre in the world – the US and Japan with bigger domestic financial markets are bigger. But it is the biggest international financial centre. This means that more international instruments and transactions are traded and completed in London than anywhere else. This is unlikely to change.

CHRIS’S PREVIOUS BLOGS

 Brexit: What It means For The City

24 April 2018

Disclaimer - These views are personal to Christopher Stoakes and are not necessarily shared by any of the bodies he belongs to or represents. Nor is this advice of any sort. Do not take any specific actions based on it. Christopher Stoakes and Christopher Stoakes Ltd hereby exclude liability of any sort for any of the views he expresses or any actions others may take based in whole or in part on them.