Several newspapers have reported an exodus in European share trading from the City, and the story has even made the front page of the Financial Times. Yet headlines about Amsterdam regaining its seventeenth century position as Europe’s financial capital are good rhetoric but bad analysis. Though the numbers look big – a shift of €6.8 billion – they mean relatively little to actual businesses. As business expert William Wright comments, this translates to only about £50 million in revenues, at the very most £5 million in tax, and a tiny number of actual jobs. As readers will shortly see, we’re covering the broader prospects for the City this week, so keep an eye on the website for that.
These equities are also only a small portion of London’s financial activities. EU shares are one of the few areas where the EU Commission can force business to be done on EU-listed exchanges. Unless the Commission were to try and isolate European financial institutions from the global market – or explicitly legislate against the City – there are few other areas of business that represent easy targets for unilateral action of this kind. Further such measures would impose higher risk premiums on European businesses – or cause direct economic damage. The EU nevertheless appears intent on treating London differently from other centers on the issue of equivalence, in the vain hope that this will force business to relocate.
It’s worth noting, too that it’s the relatively open Amsterdam market that has benefited here: not Paris, despite France’s efforts to attract business. And Europe, even taken as a whole, remains far behind the City in many areas of business.
That’s not to say that the City should be complacent – but newfound regulatory flexibility from leaving the EU looks set to open up opportunities that will dwarf any losses from European business. That’s because the main growth areas of the future are either outside Europe, in Asian markets, or in new industries, like FinTech, where regulatory flexibility is essential to attracting the early investments that snowball into larger industries. Remain-leaning outlets, then, should take a closer look at what the numbers actually mean before crowing over the folly of refusing Europe’s embrace.