24 June 2016

London was the world’s leading financial centre – until Brexit came along

Brexit has overturned the City of London's financial towers.

If the referendum told us one thing, it’s that London and Scotland feel very different about the European Union to other parts of the country.

And while these might be havens of leftie politics, the two also have something else in common – financial services.

During the Scottish referendum, the fund managers, banks and pension firms headquartered in Scotland became hot property. There were rumours the companies would make a dash for London in the event of independence.

Now it is London that finds itself in the spotlight.

Love it or loathe it, there is no doubt that London’s financial services industry is one of the world’s greatest – indeed, Z/Yen Group has named it the greatest. It is perfectly poised between The time zones of North America and Asia. It is home to English-speaking professionals.

But so is Dublin. Or Frankfurt, for that matter.

London’s last selling point has been for many years that it acts as a gateway to the 508million consumers and countless businesses of the European Union.

And that attractive point has just vanished.

In the run up to Brexit, Morgan Stanley President Colm Kelleher said he was considering shifting the headquarters to Dublin or Frankfurt if Britain voted Leave.

Of course, he might have been bluffing. But both cities would love to see him do it.

UPDATE: Oh, he has.

Sources at Morgan Stanley tell BBC it’s already begun process of moving 2,000 London based investment banking staff to Dublin or Frankfurt

— Ben Thompson (@BBCBenThompson) June 24, 2016

Tempting computer programmers with tax perks, Dublin has already emerged as a rival to London in the tech world. Google is headquartered there, as is Facebook. Frankfurt is home to almost all the world’s major banks. Its business website says ominously: “All roads lead to Frankfurt.”

As well as the attractions of these other EU cities, London’s multinationals may find it less easy to operate in the UK before. That’s not necessarily a bad thing, if it means closing tax loopholes and enjoying a proper share of the profits these companies enjoy.

But if a Brexit government decided to also impose strict immigration laws and shake up regulations previously in line with the EU, while failng to deliver on trade deals, the ability to carry out global operations could become impossible. And you can’t tax a company that isn’t there at all.