London may lose to New York after Brexit

The UK’s exit from the European Union will be a watershed moment for the City of London and weaken its role as one of the world’s leading financial centres, Bundesbank Executive Board member Joachim Wuermeling said yesterday.

Speaking in Frankfurt, he predicted Brexit would lead to higher costs for European companies by reducing the range of available financial services, weaken productivity and reduce market depth. There is also no guarantee that Britain’s departure from the EU would spur an exodus of banks to the continent, he said.

“London will not, as some have suggested, maintain its current role as the financial centre of the EU after Brexit,” Wuermeling, who is responsible for financial-market operations at the German central bank, said in his speech. “Even with the best will in the world, there is no substitute outside the EU for the freedoms, rights and obligations that come with being part of the single market.”

Determining the role of London in Europe’s postBrexit financial landscape is becoming increasingly important for policymakers and bank executives ahead of Britain’s departure from the EU next year. Around 43 per cent of all euro trades on the foreign-exchange market are handled in the UK, and London accounts for 70 per cent of trading in eurodenominated interest-rate derivatives. It is unlikely that any city in continental Europe could take over London’s role after Brexit as they lack London’s current heft to handle global transactions, said Wuermeling.