Hong Kong’s swoop will be the big­gest test yet for post-Brexit Bri­tain

The Daily Telegraph - Business - - Front Page -

Wel­come to Brexit Bri­tain, where ev­ery­thing is for sale. Or is it? The tim­ing of a block­buster bid for the Lon­don Stock Ex­change from its Hong Kong coun­ter­part could not be worse for a govern­ment des­per­ate to re­po­si­tion it­self as the pre-emi­nent global free trad­ing hub.

The City will be piv­otal to any such at­tempt to build a thriv­ing econ­omy out­side of the Euro­pean Union and the LSE is the beat­ing heart of the Square Mile. Yet the EU ref­er­en­dum – and the po­lit­i­cal im­broglio since – has turned UK com­pa­nies into sit­ting ducks.

The pound is at record lows, stock

prices have tanked and debt has never been cheaper. Blue-chip firms have been fall­ing like domi­noes.

It is at this mo­ment that Hong Kong’s stock ex­change has tabled a £32bn bid for the LSE. Its of­fer of £83.61 a share looks a lit­tle stingy at a 23pc pre­mium to LSE’s clos­ing price on Tues­day. LSE shares soared more than 15pc to £79 on the news, although they later pared back those gains to trade 5pc higher.

Brex­i­teers will claim that Hong Kong’s move is proof that Bri­tain re­mains hugely at­trac­tive to for­eign in­vestors – but don’t be fooled.

Assets don’t come much more prized than the LSE, a true pil­lar of the fi­nan­cial in­dus­try. No won­der An­drea Lead­som sounded con­fused about how to re­act.

The new Busi­ness Sec­re­tary made the usual plat­i­tudes about wel­com­ing for­eign in­vest­ment and “col­lab­o­ra­tion with in­ter­na­tional in­ter­ests” but she also cau­tioned that close scru­tiny would be given to any­thing with “se­cu­rity im­pli­ca­tions”.

In which case, the Govern­ment should be crawl­ing all over this pro­posal. The sug­ges­tion of se­cu­rity fears will seem curious at first.

The pro-democracy riots in Hong Kong may stem from con­cerns about Bei­jing’s creep­ing in­flu­ence but the city re­mains independen­t, and there seems lit­tle prospect of it sud­denly fall­ing to China.

But you don’t have to look hard to see who is pulling the strings at the Hong Kong stock ex­change.

Chair­man Laura Cha is ap­pointed by Carrie Lam, the chief ex­ec­u­tive of Hong Kong, who has re­peat­edly faced claims that she is a pup­pet of Bei­jing, ac­cu­sa­tions that have grown louder amid the in­creas­ingly vi­o­lent crack­down on stu­dent pro­test­ers. The ex­change’s boss Charles Li claimed on a con­fer­ence call with jour­nal­ists that its seven-year own­er­ship of the Lon­don Me­tal Ex­change, dur­ing which it had in­vested in the UK, cre­ated jobs and paid taxes, was proof that it would be a suit­able cus­to­dian of the City’s crown jewels. No of­fence to Mr Li, but the LME isn’t in the same league as the LSE. Surely the bigger ques­tion is whether min­is­ters are pre­pared to al­low the LSE to lose its in­de­pen­dence at all.

David Sch­wim­mer, the LSE boss, had been plan­ning to take on Bloomberg in the fast-grow­ing fi­nan­cial data mar­ket through a £23bn takeover of Refini­tiv, its clos­est ri­val.

Though not with­out risks, the deal would dou­ble its size and po­si­tion the com­pany for the data-driven trad­ing of the 21st cen­tury, as well as open up ma­jor new op­por­tu­ni­ties in bonds and for­eign ex­change trad­ing.

At a pe­riod when the econ­omy is fac­ing its most un­cer­tain mo­ment since the fi­nan­cial crisis of 2008, isn’t this the sort of bold and timely deal that the UK should be throw­ing its weight be­hind?

Bri­tain should be look­ing at ways to sig­nif­i­cantly strengthen the City of Lon­don, not weaken it by of­fload­ing its most im­por­tant in­sti­tu­tion to the Chi­nese.

Still, it is not hard to see why Hong Kong has cho­sen now to have a stab at such a bold deal. One thing that the Govern­ment has demon­strated since

‘Bri­tain should be look­ing at ways to sig­nif­i­cantly strengthen the City of Lon­don, not weaken it’

the ref­er­en­dum on EU mem­ber­ship is that it doesn’t re­ally give a fig about our fi­nan­cial ser­vices in­dus­try. The City’s fail­ure to ex­tract any con­ces­sions over Brexit in the past three years proves that point pretty em­phat­i­cally.

Per­haps it will be left to Don­ald Trump to have the fi­nal say. The US pres­i­dent has al­ready ex­pressed his dis­plea­sure at our per­ceived kow­tow­ing to Huawei and al­low­ing the Chi­nese to build our nu­clear power sta­tions.

He has also re­peat­edly la­belled China a cur­rency ma­nip­u­la­tor, a charge that would heav­ily im­pli­cate the re­gion’s pri­mary fi­nan­cial trad­ing hub. Surely any pre­con­di­tion of Trump agree­ing to a trade deal with the UK af­ter Brexit will be that a takeover of the LSE is blocked?

“Free Trade Bri­tain” has a dilemma on its hands.

ben mar­low

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