Prof Jonathan Portes of King’s College London believes there is a chance that Boris Johnson will make concessions in order to get some sort of deal.
And that is, that the EU will play a long game when it comes to the jewel in the crown. The City of London.
Portes, a professor of economics and public policy has some interesting views on Brexit and the post-Brexit scenario for The City of London. That’s not London as a whole, but rather the city within a city. The famous square mile with a population of a little over nine thousand.
Portes believes that the possibility of a deal before the year comes to an end, is a ‘toss-up.’
“We know what the outline of a possible deal looks like, he said. The question is whether either side has the political space to make the necessary compromises and concessions. And also, in particular, given that the UK is clearly the weaker negotiating partner here, the ball is in the UK’s court as far as the EU is concerned. And they’re not sufficiently worried about the consequences of a no deal to make those concessions first.”
So, where does Mr Portes see the role of The City of London in all of this? There’s been a lot of back and forth as to whether Paris was being established as a financial hub, possibly even Frankfurt. And yet we know at this point with the transmission mechanism through the banking system working so poorly across Europe, the liquidity that London provides is still important for corporate funding in the rest of continental Europe. The weekly commute to Wiesbaden, Frankfurt from Heathrow, Gatwick, and Birmingham has been chock full of bankers for decades. And nothing’s changed! So Frankfurt would be the obvious choice if any. It would seem then, the only thing holding the EU back is the fight between Frankfurt and Paris for control.
Will at some point… sensible heads prevail and come up with all the appropriate passporting deals that need to be done? Or is this going to be a problem running into next year.
According to Portes, deal or no deal, there’s not going to be any passporting arrangements. What will happen is, the EU will unilaterally through equivalence or some other mechanism, ensure that continental Europe does continue to have access to The City of London and the funding. But it will do so gradually over time, meaning it will become slightly more difficult and yet more important for firms to shift at least some of their operations to the continent.
We’ve been seeing the migrate going on for a while now – and it’s gaining momentum.
The following is from Oct 2019: A count by the London-based think-tank New Financial, found that of the 332 financial institutions getting ready for Brexit by moving business, staff, assets or legal entities into the European Union, 115 had relocated to the Irish capital. That was well ahead of Luxembourg with 71 relocation’s, Paris on 69, Frankfurt with 45 and Amsterdam on 40.”
New Financial reported that at least £800 billion ($1.5 trillion) of bank assets had been shifted into the EU, amounting to about 10 per cent of the British banking system.
https://www.afr.com/world/europe/which-european-city-is-winning-the-race-to-poach-business-from-london-20191024-p533o8 Also interesting: https://news.efinancialcareers.com/uk-en/3000398/brexit-banks-moving-out-of-london
The European strategy has been reasonably clear on this for some time. It’s not a sudden ‘big bang’ but rather a ‘slow boiling of the frog’ with the objective over time of relocating a significant proportion of activity from London to the continent. Some of that has already happened, and more will continue to happen. In the meantime, the EU will not, through this deal, but unilaterally, make sure that there isn’t a big choke point on December 31st.
Speculation is bubbling around whether Boris Johnson is only interested in maintaining his position rather than protecting the UK. That he wants only to broker some type of deal with the EU before heading back to Parliament to win a political medal of victory to show off to his pals. The idea of an extension being granted for The City of London solely, would also bring into line the comments of Portes quite neatly.
If, The City of London has an extension to the transition period, this would mean that the likelihood of financial districts such as Paris and Frankfurt taking business away from The City of London, would be put off in a sense. They would therefore have to wait for their ‘grab’ – their seizure of the powers of The City of London further down the road. This would protect The City of London. And you must remember, Boris Johnson’s interests lay here. And not in British Industry.
They are the big funder’s, the big Brexit speculators, and the big donator’s to the Conservative party after all. They are not small businesses, and individuals. They are The City of London. The square mile district and coveted home to billionaire investors.