There is confidence London's businesses can flourish when the country leaves the EU.
London is a commercial and cultural powerhouse. It has dominated rankings of global business competitiveness, attracted investment and talent globally, and enjoyed economic growth which far outstrips the rest of Britain.
While nobody can foretell London’s future in a post-Brexit world, there remain opportunities in the transition period over the next two years.
Currently UK businesses are able to provide a range of financial services anywhere in the EU, and in the wider European Economic Area (EEA), while being based in the UK and regulated by UK authorities. This is because businesses offering financial services have ‘passporting’ rights which allow them to offer financial services to the rest of the EEA (28 EU members plus Norway, Iceland and Lichtenstein) while only having to follow one set of regulations.
Where change seems most likely is in London’s financial services sector. Around 5,500 UK firms rely on passporting, and they turn over about £9 billion in revenue, a lucrative source of tax revenue for the Exchequer. Exiting the single market could strip London of its coveted role in clearing Euro-denominated financial transactions. London is the world’s principal location for trading the Euro — a $2 trillion-a-day market — accounting for about 43 per cent of foreign transactions involving the currency.
If the City loses those rights, finance employers may be required to set up new European entities to maintain business in the bloc, and have warned on moving jobs from London.
The capital’s role as a financial hub goes hand-in-hand with its reputation for having strong legal, regulatory and political frameworks. Some of the immediate challenges will come from any potential changes to the free movement of goods, services and workers across borders. Many firms rely on Britain’s EU membership to sell their goods and services freely to customers across 27 member states. UK companies can also import supplies without tariffs.
Britain will have to strike new trade deals with the EU and failure to do so raises the prospect of trade tariffs and quotas and raised costs for exporters.
Trade is just the tip of the iceberg. Businesses will have to consider how Brexit impacts contracts, supply chains, data protection, intellectual property and the tax environment.
Access to skilled labour is essential to London’s economic dominance.
London has prospered from being a completely open city. Any block to the internationality is bound to affect business negatively. London remains an extraordinary city in which companies celebrate their employees’ many different nationalities.
The real issue with Brexit is the cultural and social damage potentially wrought to the capital. Londoners see themselves as part of Europe.
However, the prevailing view is that London’s status as Europe’s commercial and cultural capital will be preserved, whatever the outcome of Brexit.
London is a hotbed of innovation, such as our thriving fintech sector, with a depth of talent and diverse industries that few cities can match.