London's lucrative clearing service 'a key target for rival cities after Brexit'
The boss of the London Stock Exchange (LSE) has warned that the capital's financial sector remains a key target for rival cities looking to steal a march on Britain after Brexit.
Xavier Rolet, chief executive of LSE, singled out London's lucrative clearing service, saying that the country should be proud of building the operation amid fierce global competition, but cautioned that the scale of London's achievements had not gone unnoticed.
It is estimated that hundreds of billions of pounds of trades a day could be lost if London's clearing service was dismantled.
Giving evidence to the House of Lords EU financial affairs sub-committee, Mr Rolet said London had reaped the rewards of "global compression", where many currencies are cleared in one location, adding that any fragmentation of the service would significantly ramp up costs.
However, he added that the "highest level of the political apparatus" in some countries had pointed out the importance of the business.
His comments come as key financial centres in Frankfurt and Paris are encouraging heavyweight financial firms to shift their operations away from London after Brexit to maintain smooth trading across Europe.
"Some would have seen outside of the UK an immediate opportunity to claim that business for their own in the context of the projected separation of the United Kingdom from the European Union.
"What has been achieved here in the UK is obviously the object of great interest by other nations, which would be very keen if they could to seek the migration of that business."
Asking whether "clearing is to clear off", Lord Shutt raised alarm about Mr Rolet's previous forecasts that a minimum of 100,000 jobs would be at risk if clearing were to relocate.
He said that if the LSE boss was correct then it could impact 400,000 people when the families of the City workers were taken into consideration.
Mr Rolet said having euro-denominated clearing embedded with other currencies in London " yields enormous, very substantial, commercial benefits to the industry. Its obviously an argument against undoing this".
"If it were to come undone, there is a risk that owing to the potentially changing regulatory framework (there would be) a very significant economic impact on our customers: banks and asset managers who post margin."
Last month, Sir Jon Cunliffe, the Bank of England's deputy governor for financial stability, told a House of Lords sub-committee it would be "highly unlikely" in the short term that the capital's unique financial ecosystem would be recreated in the likes of Paris or Frankfurt.
However, he said services could shift to New York because its finance industry has the same qualities as London.