While Brexit would potentially detrimentally affect fund management (mainly because of the EU passporting regime), the currency markets are an altogether different matter. London’s dominance is a function of several factors. First, its pole-position from a time-zone perspective – FX is a 24 hour/5.5 day a week business, and London operates in the middle of the trading day. Second, the city offers critical mass and “clustering” effects. London’s leadership has been built up over many, many years, with US, European and Asian banks all choosing to locate their operations for this European time-zone in London. Their location decision is also due to the combination of the availability of a highly-skilled workforce, a sensible domestic regulatory regime, a first-class technology and physical infrastructure, co-location with world-class professional services firms, and the presence in London of the top decision makers at many key FX clients – fund managers and corporations. And it is because of these well-established features that FX players simply will not disappear in the event of a Brexit.
James McGrory, chief campaign spokesman of Britain Stronger In Europe, says No.
No-one can say for certain exactly how the relationship between Britain and the rest of Europe would develop if we left the EU. Indeed, this crippling uncertainty partly explains why the large majority of businesses are so adamant that we should stay in Europe. That is the overwhelming opinion among those who work in our world-leading financial services industry as well. They know that leaving the EU would be bad news for the City and for the industry in general, not least when it comes to currency trading. If you think France and Germany will want the world’s largest centre for euro-denominated trades to be outside the EU, and outside the Single Market, think again. Last year, Britain won a case at the European Court of Justice protecting the City from an ECB ruling which would have forced clearing houses that deal in euros to move to the Eurozone. Outside the EU, we would enjoy no such protection, and those who are our partners now would be in no mood to do us a favour once we had walked away from our current and beneficial deal.