Billions of dollars worth of stock and derivatives trading has already vanished from the British capital after the United Kingdom completed its exit from the European Union on Jan. 1, shifting abroad to financial hubs in Amsterdam, Paris and Frankfurt.
Within days of the Brexit transition period ending at midnight on Dec. 31, London lost its ranking as Europe's largest share trading center to Amsterdam because EU financial institutions can no longer trade euro-denominated shares on UK exchanges. Analysts caution against reading too much into these early losses, but acknowledge they could be the start of a slow erosion of London's supremacy. Already, EU policymakers are taking steps to understand whether the clearing of euro-denominated derivatives such as swaps, the bulk of which still takes place in London, could move to European venues, Reuters reported this week.
Despite its huge importance to the economy, the UK government did not include financial services in Brexit trade negotiations as it raced to meet a self-imposed deadline for a deal to avoid jeopardizing trade in goods. But the European Union is not in a rush."It is not about restoring market access rights that the UK has lost. We will consider equivalence decisions where they are in the EU's interests," Mairead McGuinness, the commissioner for financial services, told the European Parliament last month.While the loss of share trading is an"embarrassing own goal at such an early stage," it doesn't mean London has"lost the match or the tournament," said Haynes.
The United Kingdom remains one of the world's largest asset management centers, second only to the United States, according to the Investment Association. And it is the world's biggest net exporter of financial services when insurance and pension services are taken into account, according to TheCityUK, a lobby group.