LONDON — Policymakers in Paris, Frankfurt and Dublin are aiming for “low-hanging fruit” as part of plans to challenge London’s role as Europe’s financial centre, according to a study by Sheffield University.
The university’s political economy research unit analysed 150 strategy documents to find common themes behind the three cities’ plans to capitalise on uncertainty around London’s future after Brexit.
The group found that the centres had targeted the following industries in an attempt to wrestle business away from London:
- Euro clearing
- Asset management
“There is clear evidence that policymakers and private actors within Frankfurt, Paris and Dublin are seeking to capitalise on Brexit, whether directly through picking the low hanging fruit or indirectly through securing regulatory or tax reform in line with the business interest,” the study said.
The City is a hub of financial activity, running a £72 billion ($US89.8 billion) trade surplus in 2014. It plays host to 35% of the EU’s wholesale market activity and 74% of over-the-counter trading, according to the report.
Rather than attempt to replace London, the European cities have focused their efforts on attracting five sub-sectors that need access to the single market to grow: credit rating agencies, regulatory bodies, fintech, asset management and euro clearing.
The UK government triggered Article 50 of the Lisbon Treaty and formally started negotiations to leave the European Union last week, and the two-year process will likely strip the UK of its financial passport. Theresa May’s government seeking to end freedom of movement for EU citizens and pull the UK out of the Single Market.
The passport is a system of common financial rules that allow UK based financial firms to access customers and carry out activities across the 28-nation bloc, and is unlikely to be offered to a country that fails to sign up to for free movement of people and capital.
On Tuesday, Manfred Weber, a Member of the European Parliament and a
prominent ally of German Chancellor Angela Merkel said that London should be stripped of euro clearing — a €930 billion (£792 billion, $US995 billion) daily business — after Brexit.
“I have the obvious interest that places like Amsterdam, Paris, Dublin and Frankfurt can win and others will lose. It will not be a positive thing for the City of London at the end,” he said.
Likewise cities are vying for European regulatory bodies such as the European Banking Authority and European Medicines Agency, which will have to be moved from the UK after Brexit.
Frankfurt has a strong claim for the EBA because it is already home to the European Central Bank, which supervises euro area lenders. But Dublin is also making a play for the agency. Irish Prime Minister Enda Kenny in January said that Dublin was the “ideal choice” for the EBA, the study said, citing the city’s stable business environment and continued single market access.
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