The vitality and success of the City of London is not because of Britain’s European Union (EU) membership, but in spite of it.
As the EU referendum date draws closer, passionate arguments on both sides will soon be overtaken by the nitty gritty details of Britain’s financial well-being after Brexit. As business leaders look to their own companies and make hard-headed decisions on what will be best for them, the realisation dawns that the EU’s commitment to ‘ever closer union’ will be bad for everyone in the long term.
London is often recognised as the leading financial centre of the world. According to the Global Financial Centres Index (GFCI) of 2015, London tops the world table. The only other European nation is non-EU Zurich at number seven.
The finance and services sector contributes an astonishing amount to the Exchequer. Financial firms alone contribute towards 10 per cent of Britain’s GDP. Overall, London provides 22 per cent of GDP -this is despite the population of the City being 12.5 per cent of Britain’s total population.
A thriving financial sector is not only vital for London, but Britain as a whole, as corporation tax and bank levies bring in around £14 billion in tax receipts alone. However, it is not the government’s taxation of companies’ profits which matter most, but the hundreds of billions gathered from high earners’ income tax and the wider investment this brings into the country.
As a global financial centre, taxes collected in London help to pay for necessary public spending, and provides 350,000 jobs in the capital, so why does the EU threaten the City of London post Brexit?
Around 40 per cent of global trade in the Euro goes through London, and Brussels clearly wants to re-route more of this trade to inside the Eurozone. Since Britain decided not to join the disastrous Euro, EU federalists would rejoice if Frankfurt (GFCI rank 14) or Luxembourg (rank 19) could catch up to London’s dominance in finance.
The EU wrongfully takes credit for the City’s success. Brussels ought to look at some of the reasons why London is a global hub of finance. The capital’s timezone is ideally placed for international trade, English is the de facto language of business, and Britain has a proud history of international cooperation underpinned by English Common Law. More and more multinationals across the globe are mandating English as their common corporate language.
The EU’s jealousy of the City isn’t just hearsay. The Central Bank Governor of France, Christian Noyer has said London should not be considered the primary destination for trading the Euro as it currently is. What many EU officials do not realise is that the fundamental nature of trade and business is colour blind. Trade relies on the accountability, trust, and worthiness of your counterpart, not the designs of far flung bureaucrats in Brussels.
In a similar fashion to Britain being outvoted by the European Council countless times, the City will soon increasingly find itself on the harsh frontlines of EU interference.The inevitable diktats are already starting to hurt. The Financial Transaction Tax and EU harmonisation are already shackling traders, hedge funds and insurers. The proof of the damage lies in the fears being voiced by City experts.
While the EU is expanding its financial authority, there are frequent calls for Britain to take a more muscular approach to growing EU powers. But does anyone seriously think Brussels will do a u-turn on a federal Europe? Every single EU treaty points in one direction: ‘ever closer union’ and the breakneck speed of Eurozone integration.
A gradual shift towards Brexit will occur within the financial sector as City heavyweights weigh in during the next few months. As David Cameron’s lacklustre list of ‘demands’ was revealed yesterday, we will eventually see more successful people such as Peter Hargreaves – who founded the FTSE 100-listed company Hargreaves Lansdown – weigh into the debate. Hargreaves recently said “I voted in 1975 when the UK voted for a free trade with Europe. But now it’s political and they’re making a huge amount of our laws. That’s not what we voted for.”
Lord Flight of Parliament’s EU Economic and Financial Affairs Committee has also shed light on the issue saying: “The EU needs the financial expertise of the City of London – if it could manage without it, it would have done so already.” As organisations such as the Confederation of British Industry (CBI) spout their regular scare stories of doom and gloom if Britain leaves theEU, but the Great British Public must remember – these are the same people who recommended Britain should join the Euro!
Perhaps unknown to the CBI, the European Securities and Markets Authority (ESMA) allows access to EU markets if the country in question is considered ‘equivalent’ with its regulation standards. Given London’s close relationship with European firms, they already comply with the relevant laws. Claims in which Brexit means a ‘race to the bottom’ regarding trading standards are completely unfounded. Outside the EU, Britain’s financial services will continue to enjoy wide-ranging access to the EU’s markets, but the final decision on regulation will be held by Westminster, not by Brussels.
What does the former head of Germany’s Central Bank say about this? Unhelpful for David Cameron following his renegotiation speech and letter to Donald Tusk yesterday, Axel Weber said a Britain outside the EU “will get a favourable deal… It won’t undermine the UK as a financial centre”. Could this be any more clearer?
It is extremely important to remember, the UK was refused entry to the European Economic Community, not only once, but twice – both in 1963 and then again in 1967 – as we were viewed as unhelpful outsiders! If Eurozone countries want to continue down the road towards a Federal Europe, they should do so, without trying to drag Britain with them.
The EU’s share of Britain’s financial and insurance exports is falling, and 70 per cent of the City’s business is already conducted globally. Leaving the EU will not be a step in the dark, but will be a giant leap forward. Leaving will increase Britain’s freedom to play a more prominent part on the world stage. This is why the we must Get Britain Out of the EU as soon as possible.
Chris Muspratt is a researcher for the cross-party grassroots Eurosceptic campaign group Get Britain Out