22 September 2020

FT Brexit and the City: Brussels’ new battle to rival London in finance

... “It would be an enormous undertaking to try to replicate the sheer scale and complexity of what happens in London,” says Mr Waight, the group’s head of regulatory affairs in Europe. “It is a question of scale or gravitational force . . . There is depth of experience and scale that could not be moved easily — even if one wanted to.”That is not a claim that sits comfortably within EU capitals, which are engaged in an intensifying debate over the extent to which they can rely on the City of London as the continent’s key financial centre in the coming decades.

The European Commission will launch a new effort in the next few days to boost its own capital markets. It is a project which has become wrapped up in the EU’s push for greater “strategic autonomy” given the vulnerabilities exposed by the Covid-19 pandemic and the great power rivalry between the US and China.

The deteriorating state of relations with the UK in recent weeks has only strengthened the argument for the EU to stand on its own two feet, officials say. The UK’s decision to breach international law in its dealings with Brussels further erodes the EU’s willingness to offer financial market access — or “equivalence” as it is known — to the UK in a range of key sectors. “We cannot afford to be the only large economic bloc in the world which has an under-developed financial sector,” says a senior European Commission official.

“Developments over the past few days and weeks have not reassured people that you can build a financial sector relationship with the UK based on trust,” the official says. “Nobody is talking about no longer doing business with the UK; London will remain a global financial centre. The question is on what terms.” Fragmented financial centres The EU has made repeated attempts spanning decades to bolster its financial centres — but it has struggled to make significant headway.

© FT plc