New York is emerging as the top candidate to lure away banking talent if London’s finance industry is damaged by Brexit , say industry insiders, making the largest US city the ultimate winner, according to a Reuters report today.
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Rather than European finance hubs such as Frankfurt or Paris, New York is the only place which rivals the depth of markets, breadth of expertise or regulatory appeal offered by London.
Solid Infrastructure
John Nelson, chairman of Lloyd’s of London said, “There is no way in the EU there is a center with the infrastructure or regulatory infrastructure to take the role London has, particularly in capital markets. There is only one city in the world that can, and that is New York."
London is the largest or second-biggest headquarters for many global investment banks. If economies of scale are diminished by having to move roles to Europe, banks may look to reduce the size of their London operations even further by moving any workers able to do their job just as well from a different time zone.
London Stock Exchange Group Plc Chief Executive Officer Xavier Rolet added that “if Brexit strips London of the ability to clear euro derivatives trades, the entire business would move to the only other city able to clear all 17 major currencies: New York”.
Morgan Stanley CEO James Gorman also said, “The big winner from Brexit is going to be New York and the U.S. You’ll see more business moving to New York.”
Moves to Re-locate
One major Wall Street bank is reported to have already begun reallocating UK headcount, and probably will end up moving many non-essential staff out of Europe altogether to the US or Asia. New York, now mainly a hub for dollar-denominated securities, could lure trading desks that had used London as a base for macro trading, speculating on currencies, bonds and economic trends around the world.
If the finance industry does end up leaving London for elsewhere in the EU, it is likely to fragment which is a problem for US banks, which spent more than two decades centralizing European operations within the so-called Square Mile.
Chancellor of the Exchequer Philip Hammond has cautioned European governments that attacking London’s financial heft in the Brexit talks could end up costing them by driving financial services elsewhere.
Open Europe’s Vincenzo Scarpetta, a senior policy analyst at the London-based think tank, echoed the warning and commented, “It’s not certain if banks move, they will move to another European hub. New York, in particular, is a much bigger hub than Paris. If this happens Europe is worse off as a whole. This should be in everyone’s interest to avoid in the upcoming negotiations.”
