Brexit and the City
In a recent chat with The Lens about the currently deadlocked trade talks between the UK and the EU, Nicolas Mackel, the chief executive of Luxembourg for Finance, opined that “there is at least one certainty, and that is that financial services will not be part of the agreement”.
With just weeks to go before the end of the Brexit transition period, the best that the UK can hope for at this late stage, Mackel believes, is a market access regime that would be “very close to the present third-country regime but with a few marginal adaptations here and there”.
Following the decision by the UK government to push through domestic legislation that would over-ride the withdrawal agreement it signed with the EU last year, the issue of trust will be key to whether any trade deal is reached.
It also underpins thinking in EU countries about the extent to which they should continue to rely on the City of London as Europe’s main financial hub.
The feeling in many European capitals is that the EU cannot, post-Brexit, afford to have an under-developed financial sector of its own.
Over 90% of the European derivatives clearing market, for example, is handled by London, and it is unlikely that other financial centres in the EU would be able to handle such a large volume of business – at least in the short to medium term.
Mackel, whose agency promotes Luxembourg as a financial centre, told The Lens: “Brexit is something that we have never, and never will, rejoice about, but it obviously was an opportunity, not only to grow Luxembourg in numerical terms, quantitatively, but also qualitatively.”
The City will gradually decline, Mackel believes, but “there will not be a sudden outflow of people, but a slow erosion that you will see in London spread over the next ten to 20 years. That is the timeframe it will take to really see the impact of Brexit.”