Chancellor Philip Hammond has hit back at Francois Hollande after the French president suggested that euro clearing could move to Continental financial centres in the aftermath of Brexit.
Just days after Britain voted to leave the EU, Hollande said that “other financial centres in the bloc'” should prepare to carry out euro clearing if Britain leaves the European Single Market.
However, Hammond today used his first appearance in front of the House of Lords EU financial affairs committee to hit back, arguing that clearing in London benefits from economies of scale with different currencies being processed at the same time.
“Most of the people that I am talking to do not believe that you can break off bits of the clearing system. Most of them do not believe that you could persuade clearing to go to any place where it doesn’t want naturally to go and that, actually, after London probably the most likely destination for clearing operations would be New York,” Hammond said.
“Not Paris or Frankfurt or Dublin or Amsterdam, but New York. And that anything that split clearing up, or tried to force it relocate, would simply force up the cost of clearing with a huge cost to the European economy as a whole.”
And the new chancellor similarly argued that Europe benefits from the accumulation of industries within the City of London, warning against attempts to lure businesses to Europe after Brexit.
“The structures that we have in London, this very complex ecosystem of banks, funds, insurance companies, law firms business services firms would not and could not be replicated anywhere else,” he said.
“And to break it up or to try to damage it in the pursuit of some very narrow and hypothetical national advantage would be a huge mistake for any of our European partners to follow. London delivers not only for the UK, but for the European Union as well.”
It came after the chancellor set the date for the first Autumn Statement as 23 November.
Hammond will use the chance to begin to set himself apart from his predecessor, and he hinted to day of a different approach.
The chancellor cited delivering productivity growth as his greatest objective, but also suggested substantial infrastructure pledged would not be among the announcements in November.
"Often it is modest, rapidly deliverable investments that can have the most immediate impact, particularly on the road network, but also in some places on the rail network," he said.
"I think there is a role for big, strategic projects, but they are unlikely to be ever able to contribute to fiscal stimulus because of the timelines involved," he said.