The doom-mongers are wrong – after Brexit, London will remain a global economic powerhouse

The doom-mongers are wrong – after Brexit, London will remain a global economic powerhouse

Earlier this year, the Financial Times cast doubt on London’s ability to retain its status as the world’s ‘pre-eminent’ financial hub in light of Brexit. Whatever our departure looks like, the editorial posits, the Square Mile will take a ‘fundamental knock’.

Contrary to this gloomy prediction, with the UK’s departure from the EU coinciding with its long recovery from recession, the City should be looking forward to a golden age to rival the boom that followed the Big Bang of the 1980s. Its in-built advantages place it in a unique position compared to other financial centres, and with the right policies in place, it should be able to thrive.

When we leave the European Union, we will be free from overly burdensome regulation and able to unleash the full potential of the City of London. With hundreds of years of experience, thousands of the most highly-skilled professionals and the headquarters of the world’s largest financial institutions, the City is set to boom for decades to come. It is one of the world’s few truly global cities and the idea that being bound by the rules of the European Union will diminish this is nonsense.

The EU’s approach to financial services has historically sought to do more harm than good to London’s status as a hub city. The threat of a Financial Transaction Tax, repeatedly vetoed by the British, was clearly targeted at the volume of trading taking place in London each day, seeking to put the brakes on high frequency trading and other activities that only enhance the efficiency of the markets. Now that we are leaving, we are free from this threat. Furthermore, when the European Union inevitably does implement this anti-commerce measure, the UK will benefit by offering investors a lower-cost alternative.

The 30,000 pages of rules that make up the EU’s Markets in Financial Instruments Directive (MiFID) have stifled the City for too long, with industry leaders repeatedly warning that it drives up costs for small- and medium-sized firms. After Brexit, we can jettison MiFID and the Financial Conduct Authority has already set out how it can relieve firms of burdensome EU rules while maintaining “equivalence” to other jurisdictions where needed.

London has already successfully cultivated this status as Europe’s global business hub, due to the traditional strength of its finance industry, its stable legal and business environment, flexible labour market and, bluntly, the fact that bankers would rather live in London than Frankfurt. In the three years since we voted to Leave, we’ve heard endless predictions of the capital’s financial infrastructure being dismantled, firms fleeing to Paris, Amsterdam and Frankfurt and its diminished attraction to international investors. Disappointingly for the doom-mongers, all evidence has suggested the exact opposite.

According to a Deloitte report at the start of this year, the UK attracted more Foreign Direct Investment between 2015 and 2018 than anywhere else in Europe. In this respect, we rank second only to the United States. On a more granular level, London proved the most attractive destination in the world for Indian FDI last year, highlighting the potential for furthering investment from beyond European shores once Brexit is delivered. Far from turning the world away, as critics suggest, the UK seems to be welcoming in international investment and attracting foreign interest like never before.

This is because the factors behind the City of London’s financial success have nothing to do with the European Union and never have. The City is home to some of the world’s best lawyers, accountants, brokers and consultants in one convenient square mile. Few other cities can boast of so much highly-skilled labour in such a small area. Furthermore, the fact that the language of business, English, is the mother tongue is a major contributor that cannot be overlooked. Finally, and it may sound glib, London is fantastic place to live and frankly other European cities simply can’t compete in that respect.

London is arguably Europe’s only truly international city, rather than simply focused on a few neighbours, its gaze extends the full circumference of the globe. When the new Prime Minister takes office, they should grab the opportunity with both hands to further entrench the City’s position as the world’s foremost financial hub. Lower corporation taxes, undoing onerous EU legislation and incentivising further foreign direct investment should all be high on the agenda.

Far from presenting a challenge and threat to the City of London’s pre-eminence, Brexit presents a unique opportunity. We will be freed up to further our ties with major financial powers outside of the EU’s protectionist control. Next time someone tells you London’s status as a financial services powerhouse is threatened by Brexit, take that view with a heavy dose of salt.