Europe’s next top financial hub

London’s financial industry relies on being in the European Union, specifically on the ‘passporting’ rights that come with being a member of the single market. ‘Passporting’ is extremely significant to firms in London as it allows insurers, banks and asset managers the right to sell their services freely across the rest of the EU. It also gives firms based in Europe unbound access to Britain to offer their services. This ‘prized’ asset has enabled London to become the financial hub of Europe, with many US and Asian companies setting up within the City, ultimately relying on passport access to the European single market.

 

Finance is far from the only sector for which the loss of EU membership could drive investment toward various locations in Europe, and in the coming weeks we will be exploring the potential impact on other, less publicized industries.  The financial sector, however, is the UK’s most high profile industry-at-risk from Brexit, understandbly so given its size and scope and the degree to which these are both enabled by Britain being a member of the European Union.  According to figures obtained from the Financial Conduct Authority, 5,476 UK firms depend on passports to do business in Europe, and over 8,000 European firms rely on free movement to offer services to Britain. There are billions of pounds of trade up for grabs if the UK fully withdraws from the single market, and with the British Bankers’ Association stating that banks are currently making contingency plans if a so-called “hard Brexit” comes to pass, many European cities are on high alert ready to battle for the business.

 

The challengers

Germany’s finance minister has made it no secret that Frankfurt, as an already established financial centre, wants London’s banks, stating that Brexit-induced relocations are “our prize to lose.” There is stiff competition from the usual suspects Amsterdam, Luxembourg and Paris, however Dublin is also looking like an increasingly logical candidate to take London’s financial sector.

 

The appeal is simple: Dublin is close to London and Ireland will be the only English speaking country in the EU once the UK leaves. There is slightly more to it than that, as Ireland’s legal system is grounded on the same common-law principles as those of the US and Britain. Dublin also has a sizeable population compared to that of Frankfurt’s, with over 1 million more people living in the city. Not only this but Ireland is already popular with finance giants Morgan Stanley and Citigroup, and Credit Suisse has recently moved a trading floor to Dublin.

 

The global financial centres index ranks the competitiveness within the sector, and despite the Brexit vote, London still remains top ahead of New York and Singapore. Frankfurt in placed 18th, and Dublin 29th. Clearly London will be extremely difficult to replace as it has an ideal breeding ground for the sector to thrive, however once the asset of free movement is taken away from London organisations will be looking to the next breeding ground, and as it stands Dublin would appear to have much on which to hang its hat.

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