The City of London will be stripped of its status as the world's premier foreign exchange centre once the UK leaves the EU, a former Bank of England deputy governor has warned.
Sir Charlie Bean, who sat on the Bank's rate-setting Monetary Policy Committee (MPC) for 14 years between 2000 and 2014, told peers he had "absolutely no doubt at all" that the City will lose the right to act as a clearing centre for euro-denominated products.
London handles 37 per cent of the world's $5 trillion-a-day foreign exchange market - the largest of any country in the world - with a majority of euro-denominated products swapping hands in the UK. However, the European Central Bank (ECB) along with a number of European politicians such as French President Francois Hollande, are known to want to bring the activity of buying and selling euros to clearing centres inside the Eurozone, such as Frankfurt, Paris and Amsterdam.
George Osborne successfully fended off an attempt to introduce plans by European officials on the grounds it discriminated against the UK and other EU members that did not trade in euros. However, with the UK heading for the exit door, Bean said he thinks the EU will put the issue back on the table, and force investment banks and traders dealing in euros to move to the continent.
Such a move would be a significant blow to the City's status as the world's number one foreign exchange market.
Bean, who recently headed up a review of the quality of data published by the Office for National Statistics (ONS) and is now a professor at the London School of Economics (LSE), also told the House of Lords EU Economic Affairs Committee the UK had not "shrugged off the Brexit result" yet.
"Some of the recent indicators have been greeted a little too enthusiastically," he said.
Global investment banks who base their headquarters in London have been keen to preserve the City's role as a top financial hub even after the UK leaves the EU. Alongside clearing rights, they also want the government to fight to protect so-called "passporting" laws, which give them the ability to operate across the other 27 members of the EU from their London headquarters.