A Post-Virus City of London Amid Brexit Negotiations

18 Jun 2020

London skyline Brexit seems to have been pushed off the agenda slightly because of the coronavirus, but nonetheless remains very much front and center as a priority for the Government. 

The Economist published an interesting article this week which said, Boris Johnson’s Government needs to take the option to prolong the transition because firstly, Brexit already happened in January, and secondly – Britain could actually pay less into the EU budget now that it’s out of the Common Agricultural Policy. A statement many would disagree with.

It’s pretty clear the UK doesn’t need to extend the transition period. And there’s no doubt that the virus has weakened the UK economy and exposed its soft underbelly, so to speak. But the virus has also weakened many other continents and economies. Spain, Italy, and France in particular. It therefore makes sense for the UK and the EU to reach a deal before the end of the year. Remaining in a transition leaves the UK exposed further to new EU regulations and rules without having a vote, veto, or voice in those. It would make economic sense, and one would argue, political sense for both to reach a deal. And as the clock ticks down towards the end of the year, there will likely be a deal between both sides – even more so with PM Johnson laying new demands for a decision by the end of August. 

The pre-crisis economic agenda of levelling up the economy, not having a Brexit transition, and moving towards a carbon zero economy, all of those big features remain very much in place. Even post-virus. 

Whether EU Chief negotiator Michel Barnier believes London should not remain a European financial hub after Brexit or not, the fact remains that London will remain a ‘Global’ financial center regardless. It will continue to compete against New York and new centers in East Asia. There’s no doubt that when in Europe, the corporation of London has the dominant lead in terms of major financial centers. And of course, it’s always possible that one or two others may gain relatively, but when one looks at the whole skill set in London – London will benefit greatly. 

It’s about whole infrastructures of the financial sector in London. And what London and the city needs to do is remain internationally competitive. At the same time there’s a strong need in the UK post virus to ensure the city continues to provide the finance needed for the UK economy.  And there’s still a massive shortfall, a funding gap for small and medium sized firms in the UK, which last year was estimated by officials to be 22 Billion pounds. 

So, in terms of The City of London, contrary to what politicians on the continent might say, London will remain the financial center of Europe, and it will need to continue to remain a place that’s attractive for people to do business from, as well as in. It’s also important from a UK domestic perspective that the UK sees more of those pools of capital being directed toward longer-term investment in the UK.