The City of London will lose its status as a global financial services hub if Brexit goes ahead without certain guarantees for the services sector. It could take time, but it will happen, French regulatory experts warn.
Image: picture-alliance/dpa
Advertisement
As only the French can, Edouard-Francois de Lencquesaing, president of the European Institute of Financial Regulation (EIFR), knows how to get up English noses.
"Like all industries, London at some point benefitted from the proximity of commodities, traders, intermediary institutions like insurance, but like all industries, it has to change and will," de Lencquesaing continued.
London dominates markets like global foreign exchange and commercial insurance and is home to international bond trading and fund management. About a third of the transactions involve clients in the EU.
The financial services sector accounts for about 12 percent of Britain's GDP and employs 1.1 million peopleImage: Getty Images/C.Gillon
The Anglo versus the French model?
But it was not an angry little Englander who stood up to question the suave Frenchman, but a Pole living in Austria. Does Europe want to remain competitive, he asked. Why allow the City of London, one of Europe's genuinely thriving sectors, to be split up?
The French financial sector regulatory expert turned his head slowly and quizzically to examine the questioner.
Leon Podkaminer, senior expert at the Vienna Institute of International Research on the Economy (wiiw), continued. "This goes beyond technicalities," he said.
"It's not a coincidence that we have two distinguished Frenchman here today on the panel. Paris will be the beneficiary. But Paris will have big problems dealing with the Anglo-Saxon traders. London regulators know all the tricks, and the French don't. US and UK business culture is permissive and spontaneous, while continental Europe tends to be wooden headed, so to speak. I think we shouldn't have illusions about what we can achieve without the UK."
Founded in 1992, the Krynica Economic Forum is an annual meeting of economic and political elites organized by the Foundation Institute for Eastern Studies in Warsaw. It has evolved from a small conference to one of the biggest meetings of leaders from Central and Eastern Europe. Sometimes it's referred to as the 'Eastern Davos'Image: DW/A. M. Pedziwol
Already bleeding
But jobs are already leaving London. Banks including JP Morgan, Lloyds, Barclays, HSBC and Goldman Sachs have already established subsidiaries in other EU countries.
Brexit could result in the loss of 75,000 jobs and up to £10 billion (€11.1 billion, $12.9 billion) in annual tax revenues, Sir Mark Boleat, an ex-chairman of the City of London Corporation, has said.
The Oliver Wyman consultancy says if the UK strikes a deal giving full market access, the impact on the City would be equivalent of 3,000-4,000 jobs. If the UK has no special status with the EU, meanwhile, the industry would lose 18 billion a year in revenue which would put 31,000 to 35,000 jobs at risk.
The so-called nuclear scenario is that the European Central Bank forces the relocation of clearing of euro-denominated trading from London to the eurozone, with the potential loss of 230,000 jobs in the City.
London not calling
Meanwhile, on the other end of Krynica, David Lidington, UK minister for the Cabinet Office, making him Prime Minister Theresa May's de facto second-in-command, was putting on a brave Brexit face.
"Well, of course there will be some costs," he said.
"But the Chequers deal proposes the UK in effect staying in the single market for goods, but having a looser relationship over services and it is the best deal we have. There is no counterproposal," he said.
The EU's chief Brexit negotiator, Michel Barnier, would beg to differ and has said there will be no separating goods and services.
"It is time for the heads of government to start dealing with the proposals as they are," Lidington said. "If this is cherry-picking, it is a very odd form of cherry-picking."
Britain's bankers eye European financial hubs for post-Brexit future
01:36
This browser does not support the video element.
Synthesis and pragmatism
But some semblance of compromise and continuity did eventually emerge.
"This notion of a culture clash between France and the UK is nonsense," Benoit De Juvigny, secretary general of the French Financial Supervision Council (AMF), told DW.
"There are certain types of division, for example, the UK has a far larger financial sector than France, and France and Germany have a huge retail base. That means a different way of accessing financial products, in the UK via brokers in a market, and in France via banks."
The key problem will be what to do with existing contracts in insurance, for example, he added.
"But we should remember that the UK will stay very closely tied to EU regulations whatever happens with Brexit."
"We also have in President Emmanuel Macron someone who wants to shake up the French financial sector, and although it will be very delicate, I don't see Brexit being a total disaster."
Who's who in Brexit?
Britain is leaving the European Union, but who exactly is directing the drama? DW takes a look at the people involved in the messy divorce.
Image: picture-alliance
Britain's embattled skipper: Theresa May
May became prime minister after David Cameron resigned from the post in the wake of the Brexit referendum vote in June 2016. Despite her position, she has struggled to define what kind of Brexit her government wants. Hardliners within her Conservative party want her to push for a clean break. Others want Britain to stay close to the bloc. The EU itself has rejected many of May's Brexit demands.
The leader of the British Labour Party has no formal role in the Brexit talks, but he is influential as the head of the main opposition party. Labour has tried to pressure the Conservative government, which has a thin majority in Parliament, to seek a "softer" Brexit. But Corbyn's own advocacy has been lukewarm. The long-time leftist voted for the UK to leave the European Community (EC) in 1975.
Image: picture-alliance/empics/A. Chown
Britain's boisterous Brexiteer: Boris Johnson
Boris Johnson's turbulent two years as UK foreign secretary came to an abrupt end with his resignation on July 9. The conservative had been a key face for the Leave campaign during the 2016 referendum campaign. Johnson disapproves of the "soft Brexit" sought by PM May, arguing that a complete break from the EU might be preferable. He became the second Cabinet member within 24 hours to quit...
Image: picture alliance/AP Images/M. Turner
Britain's cheery ex-delegate: David Davis
David Davis headed Britain's Department for Exiting the EU and was the country's chief negotiator in the talks before he quit on July 8, less than 24 hours before Downing Street announced Boris Johnson's departure. Davis had long opposed Britain's EU membership and was picked for the role for this reason. Davis was involved in several negotiating rounds with his EU counterpart, Michel Barnier.
Image: picture-alliance/AP Photo/V: Mayo
Britain's former Brexit secretary: Dominic Raab
Raab replaced Davis in early July 2018. But he only lasted four months, resigning a day after Theresa May presented a draft withdrawal plan to her cabinet. Raab previously worked for a Palestinian negotiator in the Oslo peace process and as an international lawyer in Brussels advising on European Union and World Trade Organization law.
Jeremy Hunt was Britain's Health Secretary until he replaced Boris Johnson as foreign secretary in early July 2018. The 51-year-old supported Britain remaining in the European Union during the 2016 referendum, but said in late 2017 that he had changed his mind in response to the "the arrogance of the EU Commission" during Brexit talks. He has vowed to help get Britain a "great Brexit deal."
Image: picture-alliance/Photoshot
Britain's firebrand: Nigel Farage
Nigel Farage was the leader of the United Kingdom Independence Party (UKIP) until July 2016. Under his stewardship, the party helped pressure former Prime Minister David Cameron into calling the EU referendum. He was also a prominent activist in the Leave campaign in the lead-up to the vote. Farage still has some influence over Brexit talks due to his popularity with pro-Leave voters.
Image: Getty Images/AFP/F. Florin
Brexit's banker: Arron Banks
Businessman Arron Banks is a friend of Nigel Farage, and donated a significant sum to the former UKIP leader's Leave.EU campaign – making him the group's biggest financial backer. He had several meetings with Russian officials ahead of the referendum, but has denied allegations of collusion with Moscow in the Brexit vote, branding the claims a "political witch hunt."
Image: Getty Images/J. Taylor
Europe's honchos: Jean-Claude Juncker and Donald Tusk
EU Commission President Juncker (left) and EU Council President Tusk (right) share two of the bloc's highest posts. Juncker heads the EU's executive. Tusk represents the governments of the 27 EU countries — the "EU 27." Both help formulate the EU's position in Brexit negotiations. What Tusk says is particularly noteworthy: His EU 27 masters — not the EU commission — must agree to any Brexit deal.
Image: picture-alliance/dpa/G. Vanden
Europe's steely diplomat: Michel Barnier
The former French foreign minister and European commissioner has become a household name across the EU since his appointment as the bloc's chief Brexit negotiator in October 2016. Despite his prominence, Barnier has limited room to maneuver. He is tasked with following the EU 27's strict guidelines and must regularly report back to them during the negotiations.
Image: Reuters/Y. Herman
Ireland's uneasy watchman: Leo Varadkar
The Irish PM has been one of the most important EU 27 leaders in Brexit talks. Britain has said it will leave the EU's customs union and single market. That could force the Republic of Ireland, an EU member, to put up customs checks along the border with Northern Ireland, a British province. But Varadkar's government has repeatedly said the return of a "hard" border is unacceptable.
Image: picture-alliance/empics/B. Lawless/PA Wire
Europe's power-brokers: the EU 27
The leaders of the EU 27 governments have primarily set the EU's negotiating position. They have agreed to the negotiating guidelines for chief negotiator Barnier and have helped craft the common EU position for Tusk and Juncker to stick to. The individual EU 27 governments can also influence the shape of any Brexit outcome because they must unanimously agree to a final deal.
