With talks underway on the deal to take Britain out of the EU, and the Brussels negotiator Michel Barnier threatening to “educate” the UK about the consequences of Brexit, the headlines have been bleak.
Newspapers are filled with stories of major banking institutions making plans to decamp to Frankfurt, Paris, Dublin or elsewhere in an effort to preserve their connections with the world’s biggest trading bloc, where London is “outside”.
It might be easy to believe the gloomy prognostications of some that this is the only and inevitable trend, and that London as a world financial centre is somehow doomed.
However, only last month, Deutsche Bank signed a new 25-year lease for its London headquarters, confirming its commitment to the City. This is just one of a number of institutions that have recently announced their decision to remain in London.
This should come as no surprise given that relocation costs for firms could be £50,000 per person, according to New York-based consulting firm Synechron, while employees are unlikely to be willing to move away from friends and uproot families
Simply put, there is no single obvious rival to London in the EU. Although Brexit will no doubt have its challenges, the capital’s GDP is nevertheless predicted to grow at a rate of 2.3 per cent each year between now and 2021, beating Paris at 1.6 per cent and Frankfurt at 1.5 per cent, according to research firm Oxford Economics.
In fact, the biggest potential changes to the structure and cost base of the financial industry come from innovation, including blockchain-style technology, while investors increasingly seek growth opportunities outside the mainly sluggish G7 economies.
London headquartered firms are at the heart of driving these rapid changes: out of this year’s FinTech50, the list of 50 European businesses who are transforming financial services chosen by a panel of industry experts at FinTechCity, 31 firms are headquartered in London.
No other city comes close to this. Government backing, digital expertise and a large consumer base are among the factors that have helped to cement London’s fintech capital status.
In addition, London has a history of modern finance and retains infrastructure and innovation powers that other centres will have a hard time beating. It benefits from English as the international language of business, an independent and competitive currency, and the midway time difference to act as a hub between Asia and the US.
It would be naive to say that the UK’s banks are in perfect shape, or have unassailable advantages over their international competition, but their challenges are not primarily connected to Brexit. In the case of London and its global relevance, it’s not just the banks that play a part in making London a business hub; the city’s strength lies in its diversity.
Its status as a financial powerhouse is based on its range of interlinked services, covering investment, insurance, accounting, legal, advisory, and increasingly financial technology. The interdependence and connectivity available to companies in London is second to none and the product of decades of drawing in some of the best and brightest from the rest of the planet.
This will not disappear overnight and reappear in the same breath on the continent or anywhere else.
Silicon Valley may have digital innovation, New York the traditional financial services heritage, and Washington DC responsibility for setting the policy agenda, but in London you find all three of these elements sitting side by side, driving the financial services industry forward.
No matter what type of Brexit we end up with in 2019, London will remain a significant platform for financial services and business in Europe and worldwide. Yes, we need our politicians to make a success of the process, but innovation and commercial reality is driving London on regardless.