BREXIT COULD WEAKEN LONDON AS FINANCIAL HUB: DEUTSCHE WELLE
The EU-UK trade deal that went into effect on New Year’s Day has been hailed by London as a big win as it allowed British goods access to one of the world's largest trading blocs despite its messy divorce from Brussels, Deutsche Welle reported.
The deal allows both sides to trade with zero tariffs and zero quotas.
While the deal has been hailed a success by both sides for the trade in goods, it offers scant comfort for the UK's financial services sector and especially the City of London, the world's second-largest financial hub.
At Britain's request, services were kept out of trade talks with Brussels to spur negotiators to forge a deal in a few months. But the tactic has left the UK's financial sector with only limited access to the EU market, which is worth around £30 billion (€33.2 billion, $40.1 billion) a year, Reuters noted.
From January 1, 2021, UK financial firms lose blanket access to the EU and will instead have to rely on a patchwork of regulations from individual member states.
To maintain similar pre-Brexit links, Britain is reliant on Brussels granting regulatory equivalence to its financial services sector.
So far, Brussels has only given temporary equivalence in two areas, for derivatives clearinghouses and to settle Irish securities transactions, Agence France Presse (AFP) reported.
Financial services generate 7.2% of the UK's economic output and bring in 11% of total government tax revenue. The sector employs more than 1 million people. The City of London business district has built itself into a world leader in forex trading — more than 30% of global currency trading goes through the UK capital.
Since the June 2016 Brexit vote, financial firms in London have set up new offices in EU cities including Frankfurt, Amsterdam and Dublin and have moved a trillion pounds in assets to avoid major disruption.
So far, some 7,500 UK financial services jobs have been lost to EU states, with many more likely in the next few years post-Brexit.
Banking giants Morgan Stanley, JPMorgan and Goldman Sachs have led the way, shifting more than €350 billion in combined assets from London to Germany. More than 60 international banks have also signed up with the German financial regulator BaFin.