Europe’s most important financial center is losing competitiveness.
(Photo: Reuters)
How badly will Brexit hit London’s financial center? Scoffers choose the IPO of the delivery service Deliveroo as an analogy. Treasury Secretary Rishi Sunak hailed it as a huge success for the City that Deliveroo had opted for London and against New York for its multi-billion dollar IPO last spring. The placement was intended to spark many more tech IPOs.
But unfortunately Deliveroo turned out to be a misfire – on the first day of trading, the price collapsed by 30 percent. Although the share made it just above the issue price once in a while, it has fallen significantly again since then.
Will the future of the City of London look like this too? A stormy ups and downs that cannot break a long-term downtrend? It is clear that London will not lose its dominance as a European financial center with one big bang. What has developed over many decades does not go away overnight. But it is also clear that the dominance of the city can no longer be taken for granted, and there are some indications that London’s market power will gradually erode.
Some of the consequences of Brexit were felt very quickly: the business with continental European equities migrated from London, and the market share in trading in euro derivatives fell sharply.
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What is more important, however, is that London is no longer automatically number one in new business areas. This is shown by the example of the so-called Spacs. Behind this abbreviation are empty stock market jackets that give young technology companies a quicker and less complicated route to the stock market. When the Spacs business spilled over to Europe from the USA, Amsterdam secured the largest share of the market, not London.
The mood between London and Brussels is becoming more toxic
So far, the free trade agreement between the British and the EU has completely left out the financial sector. The City of London is now hoping that the EU Commission will recognize the London financial center as equivalent. But that is anything but a matter of course.
In the past few months, the mood between London and Brussels has become significantly more toxic. Completely independently of this, the EU must finally promote the development of its own efficient capital market in order to be able to survive in the global competition for locations against the USA and Asia.
Overall, this is not good news for Prime Minister Boris Johnson, Treasury Secretary Sunak and the London banking community.
More: Great Britain is suffering from a loss of reality