After ‘Brexit,’ Finding a New London for the Financial World to Call Home
nytimes.com
nytimes.com
[1] http://www.ft.com/fastft/2016/06/30/hsbc-rules-out-leaving-l...
[2] http://www.independent.co.uk/news/business/news/hsbc-headqua...
What HSBC have said is that they may move about 1,000 jobs to Paris. That's because those jobs are tied to services that by law must be provided within the EU legal and regulatory environment. When London leaves that environment those jobs will go, not just at HSBC but across our financial sector. See my other larger post on this page for further details.
Michelin stars are not synonymous with having good restaurants. Something like a good steakhouse is not captured my Michelin, which is a very narrow definition of good food. There's also the requirement of variety, which London does extremely well: food from many different cultures, at different price points.
It's also not that clear that Brexit will force finance away from London, which is well entrenched.
Michelin rates all kinds of places, including sushi bars, Chinese takeaways and steakhouses.
Though Brexit hasn't caused this and staying in EU won't prevent it from happening (probably cheaper housing would help the most). However it may accelerate some of this trends.
Maybe not all, but a lot.
Over the last few decades London has captured a lot of business that has to be conducted within the EU for regulatory and legal reasons. One example is clearing trades; London clearing houses have captured about 80% of clearing activity from exchanges all across Europe. there are many others. Another is the LSE/Berlin stock exchange merger which was going to see the German exchange hosted and operating from London. That deal will not now happen. Unless London keeps it's financial services 'passporting' arrangements, much business conducted in London will have to be conducted within the EU.
London will not keep it's passporting rights though. The EU is built on four fundamental principles. The free exchange on good, services, capital and workers. These are inextricably linked. Since canceling the free movement of workers was the defining issue of the referendum, we will lose all four. Thus the referendum result in incompatible with membership of the European Economic Area or any similar agreement. Think about it this way. Is it fair for London to have the right to conduct business on behalf of EU businesses in London, but EU workers not to have a right to work in those London businesses? If London businesses can trade in the EU under EU rules, then EU companies should be able to set up business in London under EU rules but won't be able to because London won't be part of the EU. That's how the EU thinks about these things. They would see such an arrangement as a fundamental betrayal of their own citizen's rights.
Finally, according to EU law no member country can negotiate trade agreements with the EU, or other EU countries, or countries outside the EU. That means by law, we cannot even start to negotiate any deals with anyone until _after_ we officially exit the EU, which will probably 2 years after invoking Article 50. These deals can take many years, it took Canada 7 years to negotiate the latest deal and that's still waiting on ratification by all member governments which is likely to take another couple of years. Our economy will be operating under bare minimum WTO rules with no special provisions with anyone anywhere for _years_.
Our best option may be to exit the EU, then immediately apply for European Economic Area membership under default terms. Since we're already compliant with all the regulations, we should be able to fast track that, but it would still probably take 2 years or more during which we will be cut out of large swathes of the EU financial services industry. That business will have to be conducted somewhere, but it won't be in London. It would also mean totally betraying many key issues in the referendum though.
So this all doesn't mean London will stop being a center for finance, but when we talk about a large, double digit percentage of business leaving London it's not because people want to take that business elsewhere, it's because they will be legally obliged to.
Ignoring the legalities, the Leave vote crossed the Rubicon.
The EU has always tolerated rather than enjoyed the company of the British establishment. So the EU is happy to see the back of the UK.
The British establishment still thinks it's the 19th century, so it's happy not to have anything to do with the 21st.
The biggest loser will be the City - which is beyond ironic considering the UK has literally spent the last few decades retooling its economy around the City. Now it's about to throw that away.
We're not great at much else. The things we are good at - culture, R&D, farming, tourism - all work better in the EU than out.
In practice, immigration is a meaningless non-issue.
Getting rid of Polish plumbers won't suddenly reveal thousands of competent English plumbers hiding in a cupboard somewhere. It takes time to train people up, and the biggest source of training money has been the EU.
It takes time to rebuild manufacturing, and the biggest source of funding for rebuilding manufacturing has been the EU.
It takes time to improve education, and the biggest source of funding for improved education - especially at postgrad level - has been the EU.
We could move towards becoming a startup economy, but if all the VC money moves to Europe, we won't have the money to do it natively.
The Leave vote is possibly the single most stupid decision in all of British history.
This assertion is almost as myopic as those from the Leave campaign.
The UK is one of the richest and most populous countries in the Union, even without considering the repercussions on other members, Brexit will mean a serious blow for the EU in terms of trade loss and budget financing.
I don't think anybody in the EU should be happy of seeing UK's back, regardless of their opinions of its leaders.
It is really a lose-lose situation.
> Brexit will mean a serious blow for the EU in terms of trade loss and budget financing.
The UK can get a norwegian deal: same trade, same budget, no UK blocking.
The Germans and more market oriented Europeans further east liked the British as a counterweight to the statist French, I think.
More importantly, can the EU actually kick out Britain, if Britain decides not to go forward with the leave?
http://www.theguardian.com/politics/2016/jun/25/article-50-b...
The referendum is only advisory under British law so they'd have no legal basis on which to do that.
It would fuel civil unrest and favor far-right parties.
As much as it pains me, it is not really an option.
The whole process is stupid, but perfectly democratic.
DAX is in Frankfurt, not Berlin.
What will be interesting is if the deal does go on, but happens in reverse. It might provide an easier path for LSE-listed companies with a heavy European interest to move to DAX.
> we cannot even start to negotiate any deals with anyone until _after_ we officially exit the EU, which will probably 2 years after invoking Article 50
The two year window post-A50 is specifically for such negotiations. However I'm also pessimistic since I don't think 2 years is enough nor will the EU want to extend it (which would need unanimous support for member states)
Actually not, the two years is just for getting the divorce right. Most experts indicate that a new arrangement can only be found after the divorce is complete. Though all that probably depends on what kind of leverage rEU wants to keep in dealing with the UK.
http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on...
What they've said is that they're not willing to negotiate BEFORE the 2 years is TRIGGERED. i.e. they don't want the UK to foot-drag on triggering A50 and prolonging the process indefinitely. Basically, "shit or get off the pot"
The EU position is that if the UK is really going to trigger it, then they should do it as soon as the next PM is installed.
Again, the 2 year window is explicitly for these negotiations. It has not started yet, though.
That's what happens when goodwill gets trashed, and trust thrown out the window.
I don't think there's any valid inference from "X is what a lot of people thought they would get by voting Leave" to "X is at all likely to happen if/when the UK leaves the EU".
A lot of people thought that by voting Leave they were voting for an extra £350M/week that would go to the NHS. Nigel Farage admitted within an hour of the result that that was never going to happen, and I haven't heard anyone from the Leave camp saying anything different.
A lot of people thought that by voting Leave they were voting for the UK's businesses not to have to comply with EU regulations. But I think the most likely paths forward involve the UK continuing to do that, in order to be able to continue trading on favourable terms with the EU.
A lot of people thought that by voting Leave they were voting for much lower immigration. A bunch of senior people from the Leave camp have made it clear that that is unlikely to happen.
You talk about "totally betraying many key issues in the referendum", but that's already happened, and it's pretty clear that in so far as there was any coherent plan on the Leave side it was always intended to happen.
(... But: A lot of people thought that by voting Leave they were giving a big fuck-you to The Establishment and communicating their dissatisfaction with the state of affairs in the UK. That, they managed just fine.)
I'm not, for the avoidance of doubt, saying that if/when the UK leaves the EU we will still have free exchange of goods, services, capital and workers, or that London will keep its passporting rights. We might well lose those things. But we can't tell that we will just because keeping them would mean not giving Leave voters what they thought they were voting for. Leave voters aren't going to get a lot of what they thought they were voting for, and they never were.
If anyone of voting age believes that, they are undoubtedly an idiot.
> I'm not, for the avoidance of doubt, saying that if/when the UK leaves the EU we will still have free exchange of goods, services, capital and workers, or that London will keep its passporting rights. We might well lose those things.
We are guaranteed to lose those things at least for some time, because we can't even begin to negotiate getting them back until we're out of the EU.
The other unknown that parent did not mention is how hard will the EU make those negotiation. Everybody economical interest is that the EU accept, even politically punishing an ex-member for leaving is going to have consequences in the EU and internationally ( Eurosceptic movement have been boosted by the treatment of the people in Greece and other countries)
However, that's a bit similar that the whole referendum but applied to Europe in general, EU may well take crazy decision. See for example how Junker is talking about the UK as if it has spit in his face (remember that's a narrow victory for Leave mostly based on outright lies), then meeting the Scottish PM forgetting the referendum from 2 years ago and even saying the "Brexit will not be an amicable divorce" and anyone knows that amicable in the context of a divorce does not mean friendly, it is only amicable by comparison with the destructive mess of going through legal proceedings.
edit: The number of EU people living in the UK is more than 3 millions, that's more than the 7 smaller member of the EU, that's more people than the difference between Leave and Remain (disclaimer: that also includes me) That's what make me the most uncomfortable with Junker, he does not care about the people, he just react like a kid because the UK is making him look bad.
As I have tried to explain, negotiating to join the EEA while still a member of the EU is illegal under EU law. They can only start that negotiation after actually leaving the EU, not after triggering Article 50.
Are you still considered a full member of the EU, meaning you retain all your rights including voting ?
Lots of things are illegal for member state, basically everything that the UK needs to do in the 2 years period is illegal for a member state. Remain have been bad at campaigning but forgetting to say that -actually- they won't be able to initiate any trade negotiation until basically the day all their deals expire seems like a major blunder. If that's indeed the case, the UK will have no choice but not trigger Article 50.
Yep.
And to your other points, yes again. Article 50 is a political and economic suicide pill.
The BBC concludes that the trade commissioner is technically correct, which as we all know is the best kind of correct.
You seem to be insinuating that is Canada's fault for taking 7 years (actually, 5.5) to negotiate a trade deal with 28 member states simultaneously.
Needless to say, CETA is more likely to be vetoed by either Czech Republic, Bulgaria or Romania, than ratified.
My hometown steakhouse, Alexander's, carries a Michelin star
There is a good case for the EU to forbid banks doing EUR operations (at least those intended to trade with The eurozone) outside the EU.
The UK will probably intensify operations with tax heavens (or become a tax heaven itself), so the EU will be well advised to supervise financtial transactions to/from the UK.
Amsterdam is ranked high, but many consider it The Netherlands the next "domino to fall" since the far-right anti-EU party is polling so well there. So if you move business there, you might be back to square one a year later.
Interesting times.
I think London will be ok.
That article should have considered Edimburg, even if it might have been a journalistic faux-pas.
I'll admit to possibly being a bit of NIMBY in my comment as I live and work in central Edinburgh!
Scotland, and the Scottish Parliament, would be free to charge what taxes it wants, and have more power over where that would go.
Perhaps England can leave the EU but other NI and Scotland stay?
Firstly, economically, the remainder of the UK is a far larger market for Scotland than the EU. This wouldn't be a big issue if the UK can negotiate very good access to the single market but that's highly questionable. It also is complicated by the second point.
Secondly, it is highly unlikely that Scotland would be able to (re)enter the EU without joining the Euro. There are other exemptions the UK has that Scotland won't get but this is the biggy. It was the SNP's original economic plan to join the Euro. However, when the Euro went politically toxic following the crash, this was dropped and pretty much killed SNP's economic argument in the independence referendum. It's still pretty toxic but is probably less so given that the EU referendum has hosed Sterling.
Thirdly, a big issue in the independence referendum that hasn't gone away is that an EU entry requires unanimity and Spain are dead against separatist movements because of the Basque situation. It's possible that they will have their arm twisted by the EU commission if it means another net contributor added to the Euro block but it's not clear cut.
Fourthly, legally, they don't get to choose. They can't officially negotiate with the EU as they aren't treaty partners. Only Westminster can legally grant separation. If Scotland had voted independence the first time then it would have been followed through without a doubt. It is entirely possible the UK parliament will refuse a second time because of the outcome the first.
As to NI, all of the above and then some. The whole of the Troubles was really about NI's status in the United Kingdom and giving that up is unlikely to be a quiet affair. Maybe it won't become violent but there's more history there than in Scotland.
In short, I wouldn't even begin to know how to call this.
IE could it grow fat being the middle man between the Leavers and the EU?
It's probably worth pointing out also that, currently, the UK has a lot of wiggle room when it comes to its relationship with the EU just because of its size. It is very unlikely that Scotland will be given any of this both because it's relatively small, economically, and it won;t be in a good negotiating position.
It could be said that Scotland wanting to stay would be politically super-popular with the EU, who strive to draw a sharp divide between the benefits of the EU and the costs of leaving. On the other hand, England could see the compromise where Scotland is its trade partner in Europe as a win-win too.
From the EU perspective, my own view is that if Sturgeon can find a way to persuade Scotland to go the full EU i.e. Eurozone, no opt outs and no rebate then I can definitely see Juncker finding a way to accommodate by doing some sort of quid pro quo with Spain. Whether the Eurozone economy will recover sufficiently (and/or the UK economy will tank sufficiently) to make that politically viable is anyone's guess.
For NI, if it wasn't for the super strong unionist movement, I'd say that there was a lot to be said for them going full EU: they're small, relatively poor, bordering Eire. But that's a really, really big if, probably enough to kill any real chance of it occurring in the next 20 years.
Why? There are plenty of EU countries without the Euro..
From the EU's perspective, in order for them to go against the anti-separatists such as Spain, they'd need to have a big carrot. My guess is that full EU i.e. Euro, no opt outs and no rebate would be sufficient as it's fully in keeping with the "ever closer union" agenda. I can't see anything less being sufficiently beneficial to the EU to make the necessary compromises worth it.
Scotland voted decisively to remain in the UK, and to go the way of the UK on EU membership.
This is notwithstanding the fact Scotland is financially dependent on the rest of the UK, and would not survive on its own, let alone meet the criteria for joining the EU on its own.
People have been trying to rewrite this bit of history, but even Cameron himself didn't expect to have to follow through on his EU referendum commitment, either losing the election totally or relying on the Lib-dems to veto it in coalition.
This however seems to be a non-sequitor, from the original point, about being a member of the EU being non- or less independent than being part of the UK. So not sure what your opening "No" refers to, or why you're re-capping your anti-independence talking points.
More likely is that Spain would make things difficult - but you didn't say this
This video by an expert in EU law covers it in detail:
https://news.liverpool.ac.uk/2016/06/16/watch-dishonesty-ind...
> So let us start with a couple of myths. The first is the myth of sovereignty, there is no doubt whatsoever that the United Kingdom is a sovereign state under international law. There is no doubt whatsoever that the parliament in Westminster is the supreme law making authority in this country.
> Conversely there is no doubt whatsoever that the EU is not a sovereign entity, far from being a sovereign state, it is not even a sovereign entity, it has only those powers which has been given under the EU treaties. If the UK courts sometimes give priority to EU law in the event of a conflict with domestic law, it is purely because our parliament has expressly instructed them to do so in our own legislation.
> So is the UK a sovereign state? Yes.
> Is parliament our supreme legislative authority? Yes.
> So why do we keep hearing about sovereignty in this debate. The fact is that sovereignty is not really an issue in the debate, it is about power and influence and sovereignty is being used as a shorthand to talk about power and influence.
The depth of his analysis (which goes no further than the Working Time Directive!) is about consistent with most self-proclaimed experts on Law that have never practiced it themselves. The same goes for his impartiality.
For instance, his conclusion that the UK is sovereign because parliament ultimately decides what the UK courts do is nonsense: what do you think would happen if our courts started ignoring the rulings of the ECJ?
They won't be allowed to use the Pound.
So, they will end up like Greece.
I really why people don't see this.
It's the BRITISH parliment in WESTMINISTER who will decide who uses the pound. NOT YOU, Mr/Mrs Commentator.
And they will decide to not allow scotland to use it.
Mind you, you used to get situations (a while back) where foreign exchange places in Europe would give you worse exchange rates for Scottish notes rather than English ones.
Someone told me that, by law, they have to accept those notes, but I still have ~40 NI pounds that I took to london on a trip a couple of years ago and had to take back with me.
It's a a very tender point with people because people get weirdly patriotic regarding Scottish Pound Notes. But they are a sort of bizzare currency.
Scottish notes are a legal currency, but not a legal tender. In fact there is no such thing as legal tender in Scotland. Even BoE notes are not legal tender in Scotland.
Legal tender only means you can legally pay down debts by court order in the given currency. BoE notes fulfill this job, but only in England & Wales.
"Someone told me that, by law, they have to accept those notes"
No, they don't even have to by law accept BoE notes in England. Only for paying down debts by law is that true.
Any shop or whatever can refuse or accept anything you give them.
However, to add further confusion, every single pound of Scottish notes is backed up by BoE pound sterling.
In the banks that print Scottish notes (Clydedale, RBS, Bank of Scotland) they have to keep an equal ammount of BoE Sterling.
They even created special notes so they could hold the currency in their vaults in Banks.
You can get £1,000,000 and £100,000,000 notes called Giants and Titans, which back up the Scottish and NI pound notes.
What you are legally entitled to do however (I think?) is go into any branch of Bank you have a Scottish note of and request the equal in BoE note.
So if you have £20 RBS Scottish note, you can go in to an RBS branch legally and claim your BoE note with a nice picture of Adam Smith on it :)
I don't see why will end up like Greece. Not all countries using the Euro end up like Greece.
You also make moving somewhere more complicated. When I moved from UK to Paris, I was fine with work, with socialising, but my French was (and still isn't) nearly good enough to deal with government paperwork, appartment searching, reading up on tax law... etc. Sure, this problem can be solved either by the country making it easier for forigners, or by people moving paying for somebody to help them in these areas, but again its another barrier and/or additional cost.
There's also the matter of local work-related communications. Anything from taxis to tax offices, courier/mail services, etc...
The problem is that if you want to attract non-local talent, it's harder to attract them somewhere where they'll have trouble with day-to-day life. English-speaking countries have a big advantage here: no matter what nationality a professional has they probably speak English well enough to be comfortable living there.
As another poster mentioned there are cities where the overall English proficiency is so high that it matters less (Stockholm, Berlin, Amsterdam, ...)
I've actually had a harder time conversing with people in some parts of Scotland by phone, due to our different accents, than in some parts of Europe. Even though we both speak English as a first language. The UK can have bigger internal differences than the rest of the English speaking world.
Some of this is down to the international (US) English used in non-native English speaking places. I had to write my book on ASP.NET Core in American English, which took some getting used to. :)
Second, you may need a decent command of the local language to access services and deal with the local authorities. For example, getting your car back if it's towed. Figuring out whether you can get a visa for that foreign consultant. Expressing your views to your political representatives. Getting emergency care at a hospital. Understanding laws written in the local language. Passing a driving test. Talking to your children's teachers. Working out how much you'll be taxed on that thing you're considering having imported.
Maybe I'm an outlier, but my own tastes in culture are amply satisfied by a decent bookstore and movie theatre, or in a pinch Amazon and Netflix, these days.
As for cultural offerings? People at the top of finance make a LOT of money. They aren't just stuffing it under the mattress.
Frankfurt is just growing over 700k people.
Population (2014-12-31)
• City 717,624 • Urban 2,221,910 • Metro 5,500,000
I wouldn't be surprised that there is 7mln that can commute to Frankfurt.
Still Frankfurt itself is a small village with an airport and a few towers. The city itself calls it "the biggest village in Hesse" [0].
[0]: http://www.frankfurt.de/sixcms/detail.php?id=2942&_ffmpar[_i...
My deepest sympathy goes out to the poor bankers.
I'm not sure we can separate the incentive effects of the company making more money, or the bankers themselves making more money. The people at the top of these companies are bankers themselves, and they have bonuses too.
Presumably if a bank moved to amsterdam, it would not be able to hire the top bankers and would be left out of important money making schemes like the recent Libor conspiracy.
Big enough market disruption can easily tip the scales. And leaving the EU trade zone is pretty destructive for banking and European HQ beachheads in London.
Anyway what is the justification for a cap on bonuses? As opposed to taxing them more or something.
I think that was sarcasm.
That the bonuses are paid for with tax payers' money?
The banks fail, then get bailed out... and from the bailout money they continue to pay themselves bonuses when they actually shouldn't see a dime.
Banks had to be bailed out a bit too much recently to still be allowed such high bonuses.
But more than that, why this focus on bonuses rather than total compensation? Surely what matters is how much someone is paid, not the details of how that payment is structured.
I am a banker (although we are a startup bank), and for us the bonus is structured so that it is not paid in full immediately. Quite a bit is held back in case someone does something unhealthy to the company to reach their short term bonus goals. This is not common practice though.
If specific pay structures create bad behaviour then perhaps we should ban them, sure. But banning bonuses in general seems far too broad. How many people complaining about bonuses on this site have pay that includes stock or options - aren't those much the same thing?
Perhaps a Toyota Avensis, built in Derbyshire...?