LONDON (Reuters) – The UK financial industry will emerge stronger from Brexit and remain one of the best financial centers in the world, ministers said in Prime Minister Theresa May’s government forecast on Monday.
FILE PHOTO: The financial district can be seen as a person walking in the sunshine on London’s South Bank, Britain on February 23, 2019. REUTERS / Henry Nicholls / File Photo
Since the UK voted to leave the European Union three years ago, London’s financial services industry has been shaken by the prospect of ending four decades of regulatory integration and losing access to the bloc in one fell swoop later this year.
London, home to the world’s largest number of banks and the largest commercial insurance market, may have a lot to lose if unrestricted access to the EU market after Brexit, its largest trading partner, ends.
However, UK Trade Secretary Liam Fox said the decline of London’s financial industry known as the “City of London” had been mispredicted over the past three decades, finding new ways to reinvent itself each time.
“Time and again, Doom-Mongers have predicted the city’s demise and have proven themselves wrong again and again,” Fox told an audience at the medieval Guildhall, which was built over a ruined Roman amphitheater in London’s traditional financial center.
“I am convinced that once the dust settles, the City of London will do what it always does, which is fitter, stronger and more dynamic than ever before.”
At the turn of the century, some financial sector executives warned that failure to enter the euro would diminish London’s role as a business hub. And after the financial crisis of 2007/09, many banks also threatened to move overseas.
In both cases, the UK financial sector expanded, although many banks, insurers and asset managers in London moved some staff and activities to new hubs in the block over the past year in order to maintain access to the EU.
The financial industry remains extremely unpopular with the public because of its role in the financial crisis. According to Fox, the government estimates the sector, which accounts for about 12% of the UK’s economic output, employs about 2.2 million people and pays more taxes than any other industry.
“Those who threaten the city’s viability or stir up resentment against the sector should remember how much it pays the bills,” he said.
UK Financial Services Secretary John Glen said the City of London’s traditional strengths are in good health and new sectors such as fintech are growing.
However, the “slow and frustrating” process of reaching an agreement in Parliament on Britain’s exit from the European Union has remained a “persistent” shadow over the sector, Glen said.
“I know the city wants and honestly deserves certainty, and I’m sorry I can’t give it today,” said Glen.
Former Barclays bank chairman John McFarlane said the city cannot take success for granted, especially if the EU closes its markets to the UK and foreign financial firms are forced to move their operations from London to the bloc.
Bernard Mensah, the president of Bank of America Merrill Lynch in Europe, the Middle East and Africa, said its chiefs in the United States were confused about the UK’s decision to leave the EU and were diverting attention from bigger challenges.
Mensah said the best strategists, lawyers and tech people were working to prepare his bank for leaving the EU.
“There are real underlying costs,” he said. “The challenge that we are facing as a region, as an economy and as an industry is huge and we will be distracted if we now concentrate on Brexit.”
Catherine McGuinness, the political leader of London’s historic financial district, said the industry was angry at the uncertainty surrounding Brexit, which has damaged the UK’s image abroad and needs time to rebuild.
“The biggest problem is that we no longer know which country we are in,” she said.
Reporting by Huw Jones and Andrew MacAskill; Arrangement by Louise Heavens and Alexander Smith