An article in yesterday’s Financial Times (FT) claiming that American banks are planning to move some of their activities to Dublin in the event of a British exit from the EU has been dismissed as “poorly briefed rubbish” and “wholly spurious”.
According to the FT “Most US and Asian banks have chosen to base their main European operations in the UK, giving them an automatic passport to carry out their services across all 28 countries in the EU.
“But senior US banking executives said the UK was unlikely to be granted the same “passporting” rights if it left the EU – the so-called “Brexit” scenario.”
The article goes on to claim that executives in American banks are therefore seeking to move certain activities requiring ‘passporting rights’ to either Dublin, Ireland or possibly Frankfurt in Germany but that they are concerned about speaking up in public lest they offend the UK regulators.
However, this speculation fails to take into account the financial benefit to banks of leaving the highly regulated EU, and the fact that London is a global, not merely European city.
Philip Booth of the Institute for Economic Affairs commented on the story, saying “The key point is that Britain is an international financial centre and not a parochial European centre. It is naïve to think that if Britain remains in the EU it will remain a world financial centre and, if Britain leaves, our business will go to another EU country.
“It is just as likely – if not more likely – that the anti-finance attitude of the EU will cause a migration of business from the City of London over the coming decades if we do not exit Europe. There are plenty of Asian centres that would be attractive places to do business and Europe is a player of decreasing size on the world stage.
“Furthermore, London is around 15 times as big as Dublin. Even if businesses become headquartered in another financial centre in order to fulfill single market requirements, it is inconceivable that the actual economic activity could take place in a city as small as Dublin or Frankfurt.”
His comments were echoed by Steven Woolfe, a Ukip MEP with experience in the City of London, who dismissed the FT’s claims saying “I have had a conversation with a lobbyists for one US firm with offices in Belgium who are thinking the opposite. I don’t think it is actually happening. Ireland hasn’t got the infrastructure to take on the business they want and will be hit by the Financial Transition Tax which we won’t.
“The report is based on the wholly spurious claim that the UK would not have access to the single market or trade with the EU after we left. Such a proposal flies in the face of more and more City based businesses such as Legal & General stating that the EU is dragging down the competitiveness of, and increasing the costs of the industry.
“If these jurisdictions benefitted US firms now, they would be already there. The reality is that if these firms are actually planning to go to Dublin they are clearly also factoring in that Dublin will not be exempt from the Financial Transition Tax; that increasing EU regulatory costs planned by the European Securities and Markets Authority and the European Banking Authority will have no impact; and that when out of the EU, the UK financial services sector will no doubt have a renaissance as it becomes more nimble and able to access more of the global market without the EU holding it back. In short, it makes no sense and seems that the silly season isn’t just for journalism but also government affairs officers advising their US employers.”
A spokesman for Business for Britain was even more dismissive, calling the article “poorly briefed rubbish”. He too highlighted that, as an EU member state, Britain is regularly overruled by the Eurozone and forced to adopt regulation that is damaging to British businesses, and pointed out that the potential for growth is far better for an independent Britain, able to trade freely with the whole world rather than being shackled to a declining European Union.
Financial service firms are estimated to contribute around 9.6 percent of British GDP, whilst EU membership is estimated to cost Britain around 11 percent of its GDP. London was knocked off the top of the list of Global Financial Centres this year by New York. The next EU city on the list was Frankfurt, at #11.
COMMENTS
Please let us know if you're having issues with commenting.