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Brexit 'could hit some of London's wholesale financial market activities'

Published 03/11/2016

Brexit would not be a 'zero-sum game', said the Bank of England's Jon Cunliffe
Brexit would not be a 'zero-sum game', said the Bank of England's Jon Cunliffe

The Bank of England has warned that London could lose some wholesale financial services business because of Brexit.

The Bank's deputy governor for financial stability, Jon Cunliffe, used an address to leading City figures to insist withdrawal from the EU would not be a "zero-sum game".

Mr Cunliffe said: "We do not yet know what arrangements will govern the trade of financial services and the integration of financial markets between the UK and the EU once the UK has completed its exit.

"That will be one of many issues to be determined by governments in negotiations over the coming years.

"What I think is clearer is that this is not a zero-sum game."

Speaking at the Association for Financial Markets in Europe's annual dinner in London, he said: "It is certainly possible - indeed some would say likely - that some wholesale financial market activities currently carried out in London and elsewhere in the UK are in future carried out elsewhere in Europe.

"The re-emergence of London as the world's leading financial centre over the past 50 years, despite the decline in importance of the UK in the world economy, is the product of many factors.

"It may in part be due to London's role as Europe's financial centre.

"But the scale and scope of broader international activity here suggests that clustering effects such as labour market externalities, specialised inputs and knowledge transfer have become even more powerful in a world of financial globalisation.

"It is conceivable that given time, these effects and the benefits they bring in terms of more efficient allocation of capital and risk could be replicated elsewhere in Europe.

"It is in my view more likely that if they are lost in London they would be lost to Europe - for the foreseeable future at the least.

"Fragmentation of wholesale financial markets activity in Europe, to the extent it occurs, is likely to have a general cost to European economies, including the UK."

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