New York is better placed than major European financial centres to benefit from any loss of business in the City of London as a result of Brexit, a deputy governor of the Bank of England has said.
Amid attempts by Frankfurt, Paris and Dublin to catch possible fallout from London, Sir Jon Cunliffe said it was highly unlikely that any EU centre could replicate the services offered by the UK’s financial services industry.
“I can’t see [what the City offers] being replicated in the foreseeable future in one place in the European Union,” he said, pointing out that huge parts of the UK financial services industry are based outside London.
“It takes an awful lot of time, human capital, it’s based around the interaction of financial services. Theidea this ecosystem is transplanted somewhere else into Europe in the foreseeable future … I think to me is highly unlikely,” he told peers on the EU financial affairs subcommittee.
Asked whether business would move to the US, Cunliffe said: “Could it be transported to New York? Well of course it already exists in New York.”
It is a view that has been voiced by Xavier Rolet, chief executive of the London Stock Exchange, who had said European financial centres would not enjoy “easy pickings” after Britain leaves the EU and that New York would be more likely to benefit.
The debate about how much of its financial services industry the UK will lose as a result of Brexit is raging. The major players are keen to retain access to the remaining 27 members of the European single market and so-called passporting rights making it easy to conduct business across the EU. The government appears to be leaning towards a “hard Brexit” under which such access to the single market is less certain.
Another senior Bank of England figure, Anil Kashyap, a newly appointed independent policymaker, said this week that the UK would lose out from taxes paid by City workers if jobs moved out of London as a result of a hard Brexit.
Cunliffe, who was careful not to drawn into the political debate, said it was important that the final outcome was reached “in a smooth and orderly way”. But he did say that the cost of raising loans would increase, not just for UK companies, if the current business conducted in London were to fragment.
The deputy governor responsible for financial stability, Cunliffe also played down the suggestion that London would be forced to give up its role in clearing euro-denominated transactions.
He said the result of the 23 June referendum had been surprise for the markets, and pointed to the impact of politics on the pound.
“I think the hardest news for markets to process is political news. I think markets find political uncertainty very difficult to estimate as opposed to economic uncertainty,” he said. “As more news comes into the markets, markets will react.”
Last week, a strategist at HSBC, David Bloom, said: “The currency is now the de facto official opposition to the government’s policies.”
Appearing before the peers, Cunliffe also referred to the sudden moves in the pound last week. The Bank of England and the Bank for International Settlements – known as the central bankers’ bank – is scrutinising the events of last Friday when a so-called flash crash resulted in the pound falling 10% against the dollar in a matter of minutes before recovering some of its losses.
