We have previously written about how leaving the European Union will help to protect the UK’s crucial financial sector from damaging interference from Brussels, whether that be by lifting onerous regulations from our insurance sector or opting out of the threatened tax on financial transactions.
But there is another reason that Brexit should be seen as an opportunity, rather than a danger, by the City of London. The simple fact is that our financial industry is not Europe-facing but global-facing, that departing the EU offers the Government an unparalleled opportunity to make our world-beating banks and insurers even more competitive.
It only takes a few statistics to give an idea of the sheer scale of London as a global financial hub. For example, assets under management here have hit a record value of £8.1 trillion. London is also home to more than a third (37 per cent) of the entire global foreign exchange market. Nearly twice as many dollars are traded here, in Britain, than in the United States!
Not only will our trade with the rest of the world be largely unaffected by Brexit (save for where we can avoid damaging EU rules), but even before we leave our global links are already booming: according to official statistics the UK’s services trade with non-EU countries grew by 73 per cent in the decade from 2007 to 2017.
But that’s no excuse for resting on our laurels. Far from treating our current global trade as a buffer against Brexit disruption, ministers must seize this unique opportunity to build on London’s current success and maximise its potential.
And what potential: London topped the 2015 Global Financial Centres Index, and according to IBM it attracts more investment than any other city. It is top-ranked for business environment, financial sector development, infrastructure, its skilled workforce, and its reputation – none of which would-be replacements in the EU can replicate – and also scores highly in other areas such as banking and investment management.
So what’s holding the City back? Simple answer: EU trade rules.
Unlike many other Member States, Britain’s economy – especially our export economy – is heavily concentrated on the service sector. In fact in 2017 they were worth fully 79 per cent of the UK’s GVA and were worth £1.6 trillion. We might no longer be building the world’s ships and digging its coal, but when it comes to providing cutting-edge, expert services and support the UK remains a world leader.
Yet we’re locked into EU trading structures which consistently treat services as a low priority. Not only has Brussels consistently proven loathe to properly incorporate services into its trade deals with other countries – the very ones many Remainers claim Britain can’t do without – but it has even dragged its feet on creating a ‘single market in services’ inside the EU itself!
In fact, some sources even suggest that the single market in services has actually been shrinking over the past few years, although it is difficult to tell for sure because Brussels has (mysteriously) stopped regularly publishing the relevant statistics.
For all its strengths, London does face serious competition from rival cities – it’s just they’re not in Europe. New York, Hong Kong, Tokyo, and Singapore are all top contenders, with up-and-coming cities such as Toronto and Shanghai likely to gain ground in the decades ahead.
That’s why we can’t afford to stay locked into Brussels’ regulations and rules. If the City is to maintain its pre-eminent position – supporting hundreds of thousands of jobs across the UK and generating vital tax revenue – it’s absolutely essential that the Government brings control of financial regulation back to Britain.