BoE deputy governor: London's financial services firms could go to New York

Jake Cordell
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Wall Street could be the real winner from Brexit (Source: Getty)

A top official at the Bank of England has warned New York could poach some of London's financial services firms if the UK does not secure a good Brexit deal.

Jon Cunliffe, deputy governor with responsibility for financial stability, said while the threat from European financial hubs like Frankfurt, Paris or Amsterdam was unlikely to be a problem for the capital, firms might start looking to New York as a better place to do business if the cost of operating from London jumped.

Questioned on the prospects for London as a financial centre over the coming years, Cunliffe told peers on the House of Lords EU financial affairs committee: "What we call London ... I can't see that being replicated in the foreseeable future in one place in the European Union."

He added the "idea the ecosystem just transplants itself is highly unlikely". However, Cunliffe warned: "Of course, it already exists in New York. There's such a large and complex ecosystem there, so could some of the things that happen in London now transfer to New York if they could no longer happen here? I think so."

Read more: Investors more concerned about passporting than immigration

Before joining Threadneedle Street in 2013, Cunliffe was the UK's permanent representative to the EU and also acted as an adviser to both Gordon Brown and David Cameron on European affairs.

He said he expects negotiations over passporting rules, which allow UK firms to operate in the rest of the EU and vice versa, to be a "painstaking process". However, Cunliffe said European firms would also face higher costs if the two sides insisted on "putting up barriers" to operating seamlessly across the two jurisdictions.

Those thoughts were echoed by the Treasury's most senior civil servant who told MPs today: "EU countries have every bit as much interest in access to our market as we do to theirs." Tom Scholar, the Treasury's permanent representative, also reiterated comments by chancellor Philip Hammond that financial services would be a "high priority" in the upcoming Brexit negotiations.

What is passporting?
Passporting allows financial services firms which are authorised in the UK to operate throughout the European Economic Area, and vice versa. Without the rights, these firms would not be able to operate in other countries in the same way they do today.

According to Financial Conduct Authority figures, there are 13,484 firms in total which use passporting, of which 5,476 are based in the UK.

A number of banks and other companies are concerned these rights won't be secured in the Brexit deal so they'll need to find other solutions in keep servicing their clients.