With a trading relationship still to be defined, the City of London stands on shaky grounds. This month has brought fresh fuel for the fire of concern over the strength of the UK’s financial services industry post-Brexit. The think tank New Financial has found that over 440 financial services firms have moved at least some elements of their business to the EU. These include staff, operations, legal entities, and approximately £900 billion in assets.
Granted, we have seen a large influx of firms requesting UK authorisation, and this reinforces the reputation of the UK as a financial services power. However, part of the UK’s modern accumulation of power involved the City becoming ‘Europe’s banker’. Now, London is seeing EU collaborators turn into competitors with this flow of business – and therefore power – back to the bloc. This begs the question: how does the City sustain its historic status now?
Firstly, the City must reflect inwardly on its own identity both as an individual financial hub, and as part of the wider UK business landscape. Yes, we have seen an influx of EU firms registering with the FCA, many of which will be setting up a business in the UK for the first time – very likely because of the UK’s reputation for robust regulation and financial services power. However, the City, and the UK more widely, cannot rely on this stream of business alone.
With all eyes on if and how the UK will succeed post-Brexit, Government needs to pull every lever it can to meet its goal of creating a ‘global Britain’. This means that the whole of the UK must be involved in order to make the most of every drop of talent and skill and productivity on offer. Consider Birmingham, now in the spotlight because of Goldman Sachs’s decision to open/move operations there, or the regional and national fintech hubs involved in the just-concluded UK FinTech Week. The City – indeed, the UK as a whole – should do as the EU does and share power, outputs, and influence across multiple locations to maintain its power and status. One centralised financial services hub will not suffice.
The City is already associated with finance, trade, robust regulation, and trust. It must build on these associations and shift from a location to a brand. It can style itself as a hub of ideas and resources and expertise that can be shared with established and emerging financial centres across the UK. There is power and history in the streets and buildings of the Square Mile, but this power is at risk of being consigned to memory if the City fails to innovate and expand beyond its small patch in London.
Besides encouraging cross-UK partnerships and decentralisation, London needs to work with the government to make good on the recommendations of the Hill and Kalifa reviews. Already we have seen Treasury and FCA announcements confirming that they will action recommendations like the ‘scalebox’. At J7, we hope this trend continues in order to position London not just as a historic place for traditional finance, but also a powerhouse for creativity and innovation.
All of these efforts must be underpinned by precise, forward-thinking strategy and clear communications to forge strong partnerships and engage key stakeholders. During this historic inflection-point, the correct positioning of the City, and the UK is crucial. That is why companies like J7 exist: to support leaders in business, government, and beyond with building connections and reaching the people that matter most.
This article is from our April J7 Bulletin – read the full issue here.