Eurosceptic claims that the City of London would be unaffected by exit from the EU are misleading and inaccurate. Business for New Europe, the pro-European business campaign, was responding to the publication of the latest instalment of Change or Go, the report by Business for Britain that is being serialised in the Telegraph.

 

Lucy Thomas, Campaign Director of Business for Britain, said:

 

“As banks and financial services companies themselves make clear, outside the EU there is no guarantee that they could continue to trade as freely as they do now.  While 84% of directors and partners of City firms want to remain in the EU, just 5% want to leave. Several have said that they would have to reconsider their presence in the UK were we to leave the EU and a number of banks have already been looking at property abroad in order to be prepared to do so if necessary.

 

“London is the world’s financial centre in Europe and accounts for 85% of Europe’s hedge fund assets, 42% of its private equity funds and 50% of its investment bank activity. More than two million people are employed in financial services across the UK. Brexit would undoubtedly upset the prosperous situation that the sector has enjoyed within the European Union. 

 

“The simple fact is that, in order to access the European financial passport, Britain would have to be in the Single Market. That would leave us subject to 75% of EU regulation, over which we would have no power, while we would still need to pay billions into the EU budget every year. Switzerland does not have access to the single market in finance, which is why so many Swiss banks have operations in London.

 

“Business for Britain claim that ‘it is very unlikely that the EU would try to deny the City access to European capital markets.’ They have clearly not read the reports in the Irish press today that the Republic could be in a position to attract 15% of Britain’s FDI flows, worth €15bn. London is a centre for non-European banks which want access to the Single Market, and the rest of Europe would do everything it could to tempt them away if we left. That is what happens when you turn friends into competitors – they try to eat your lunch.

 

“Even Business for Britain themselves admit that the UK would need to ‘replicate EU financial laws as they are produced’ if we left. We would find ourselves, like Norway and Switzerland, governed by rules that our government and our representatives would have no say in making. Regulation without representation is not an acceptable position for a great country like Britain.

 

“The claim that Britain has little influence over EU financial regulation is clearly nonsense. Recent British efforts to advance the interests of the City have been successful, whether it be the European Court judgment protecting euro-denominated trading in London, the British exemption from EU plans separating retail and investment banking, or the refusal to allow the EU as a whole to move on the financial transactions tax. The creation of the “double-majority” lock in the European Banking Authority showed that Eurozone countries are sensitive to the needs of the “euro-outs”. Moreover, Britain’s European Commissioner, Jonathan Hill, holds the finance portfolio. Not only will he advance the exciting Capital Markets Union agenda, but he is in a perfect position to smother initiatives that might be harmful to the City.

 

“It is indeed ironic that this speculative piece of work has appeared on the same day that Standard and Poor’s, one of the world’s largest credit ratings agencies, has said that Brexit would ‘pose substantial risks to the balance of payments, the currency and the economy’. The vast majority of respected analysts, and workers in the City themselves, are clear that EU membership benefits our financial services sector.”

-          Report about Irish gains from Brexit here: The Irish Times, ‘Ireland could pick an additional €15bn in FDI if Britain leaves EU’, http://www.irishtimes.com/business/economy/ireland-could-pick-an-additional-15bn-in-fdi-if-britain-leaves-eu-1.2260666

-          House of Lords report on EU financial regulation here: The House of Lords, The post-crisis EU financial regulatory framework, http://www.publications.parliament.uk/pa/ld201415/ldselect/ldeucom/103/103.pdf

-          For facts about the UK financial services industry and the EU, see here: TheCityUK, UK and EU: A mutually beneficial relationship, http://www.thecityuk.com/research/our-work/reports-list/uk-and-the-eu-a-mutually-beneficial-relationship/

-          Business for Britain’s report on financial services is reported here: The Telegraph, ‘The City has nothing to fear from Britain leaving the EU’, http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11693846/The-City-has-nothing-to-fear-from-Britain-leaving-the-EU.html

-          Standard and Poor’s reported here: The Times, Brexit ‘poses threat to the City, sterling and the economy’, http://www.thetimes.co.uk/tto/business/markets/europe/article4478091.ece
- TheCityUK survey is here: The City Speaks: http://www.thecityuk.com/research/our-work/reports-list/the-city-speaks-a-milestone-study-of-the-views-of-financial-and-related-professional-services-leaders-on-the-eu/ 


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