EU is ALREADY targeting City with self-harming Brexit punishments, MPs told
EUROPEAN Union finance chiefs are cold-calling British companies to warn them of post-Brexit punishments for the City of London, the boss of the London Stock Exchange (LSE) warned today.
Xavier Rolet, the group’s French-born chief executive, insisted Brussels has “already started” to try and dismantle the UK’s dominant financial services industry following the EU referendum.
This is despite attempts to nobble the City - including the removal of London’s ability to carry out ‘clearing’ of euro currency payments - being a self-harming move by the bloc, Mr Rolet added.
Joining other powerful City bosses to give evidence to the House of Commons’ Treasury Select Committee this morning, Mr Rolet outlined how the EU has targeted the City since the Leave vote on June 23.
Mr Rolet said: “Since basically the outcome of the referendum, we have seen calls made by continental regulators to customers warning them of the risk that euro-clearing… would be mandated to leave the UK.
He added this had put “immediate commercial pressure” on London-based businesses in the wake of the EU referendum.
Mr Rolet described how the City had carried out ‘clearing’ activities worth 327trillion euros in 2015 but warned such activities could now be forced to quit Britain by vengeful EU chiefs.
He said Brussels could either attempt treaty change to ban euro-clearing outside of the eurozone or, more simply, introduce “specific technical requirements geared towards isolating and making it actually impossible to clear euro-denominated securities in the UK whilst permitting it to continue to clear in the US and Japan”.
These would be “those sort of pesky, well-targeted seemingly minor regulations that actually have a major impact on customer behaviour”, the LSE boss added.
Mr Rolet agreed with Tory MP Kit Malthouse’s assessment the EU is already “manoeuvring to try and single the UK out on clearing, in a way that doesn't affect other countries”.
Mr Malthouse suggested the EU’s behavior is “effectively retaliatory political action” for the Brexit vote.
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Pesky, well-targeted seemingly minor regulations that actually have a major impact
Mr Rolet warned Brussels it is both in the UK and Europe’s advantage to “continue to be able to rely on London's ability to offer huge economies of scale in clearing, in asset management, in trading”.
He also cautioned the EU it is more likely Brussels’ efforts to meddle with the power of the City of London would see finance companies flee to New York rather than move across the Channel to the Continent.
The former trader backed Committee chair Andre Tyrie’s claim the EU would be “cutting off their noses to spite their faces at a time when the eurozone is pretty fragile” if they continued to target the City.
But Mr Rolet insisted the EU had a long history of ignoring its own economically harmful practices.
He said: “If one looks at the importance of economic competitiveness and attractiveness as part of the EU legislative process and if one looks at, say, the last 20 years, it's not obvious economic competitiveness always stands at the front of of preoccupations in the EU process.”
Also giving evidence Elizabeth Corley, vice-chair of German finance giant Allianz, told MPs they could have confidence the City of London could continue to expand post-Brexit.
She said: “There are scenarios where business can grow, certainly. Particularly given the attractiveness of the UK [as a place] in which to do business, there's no reason why we wouldn't do.
“We happen to be a German company but we have a significant and growing business here in the UK because we can find talent and the right environment. So there's no reason why that shouldn't continue.
“The freedom of finding the right people, putting them in the right place, a good regulatory environment, a predictable tax regime. All of that makes the UK a very, very attractive place to do business.”
But HSBC group chairman Douglas Flint told MPs his company was preparing to relocate 1,000 jobs from London to Paris due to a lack of clarity over the Government's Brexit plans.
Mr Flint said: “We would take pre-emptive action in order to ensure that we had the capacity in place in order to be able to continue to deliver what we deliver today from a different set of arrangements.
“We are in perhaps a better position than many having a full service bank already in France and therefore we have an operation already in the European Union.”