Britain’s financial sector is afraid of a Brexit, but they’re perhaps not as fearful as the Eurocrats, who fear a stampede out of the EU. From Don Quijones at wolfstreet.com:
Follow the money.
One of the glaring but oft-overlooked ironies of the Brexit debate is the fact that the UK has been one of the biggest beneficiaries of the creation of the euro, despite not being a member of the Eurozone and holding the single currency in rampant disregard. The UK economy has certainly benefited more than most Eurozone economies.
Since 2001 Britain’s share of key financial markets has exploded. London is now home to almost one-half of the entire global interest-rate OTC derivatives market, compared to 35% in 2001. Its share of global forex turnover increased from 33% to 41% between 2001 and 2014. And its share of global hedge fund assets doubled, from 9% to 18%.
Almost 2.2 million people work in financial and related services such as accounting and law, two-thirds of them outside London, reports a study by the financial services lobby group CityUK. They produce nearly 12% of the UK’s GDP, 11% of its tax take, and a net trade surplus of £72 billion ($104 billion).
Financial services have taken a third of foreign direct investment in Britain since 2007, most of it coming from the EU. These are some of the reasons why The Economist magazine recently identified the City of London as the place with arguably most at stake in the Brexit debate, especially with its two biggest rivals, Paris and Frankfurt, vying to take a piece of the action.
The fact that Frankfurt is already home to the European Central Bank’s lavish headquarters makes it the most likely contender.
“In the unlikely event that the UK were to leave, Frankfurt would clearly be a main beneficiary,” says Hubertus Vaeth, who runs Frankfurt Main Finance, the industry association for the city’s banks. “Quite a few actors have prepared. Don’t ask me for names, because nobody wants to be quoted on that – but we do know from quite a few players that they have plans for such an unlikely event.”
That’s not to say that Germany is banking on Brexit. As the BBC points out, German business is strongly anti-Brexit. A recent survey by the Bertelsmann Stiftung think-tank found that 83% of German businesses opposed it.
As for most City-based banks, they would much prefer to continue operating from London than have to move their European base to Frankfurt or Paris, where they can probably expect a lot more government interference in their operations. When it comes to financial secrecy, no European jurisdiction – not even Switzerland or Luxembourg – can hold a candle to the wholly autonomous City of London, one square mile inside the nation’s capital that for centuries has existed as an ancient, semi-alien entity lodged inside the British nation state; a “prehistoric monster which had mysteriously survived into the modern world”, as a 19th-century would-be City reformer put it.
Despite attempts down the centuries to reform the City, it remains the only jurisdiction in the UK not fully subject to the authority of parliament. In fact, the relationship seems to work the other way around. Behind the Speaker’s chair in the House of Commons sits the Remembrancer, whose job is to ensure that the interests of the City of London are respected by the elected members.
To continue reading: Who’s Really Most Afraid of Brexit? And Why?
