Hurting the City will hurt the EU too, experts remind MPs
Attempts by other EU member states to undermine Canada's financial crown will wind up hurting them too, banking and finance experts reminded MPs today.
Representatives from influential City groups, along with deputy editor of the Telegraph Allister Heath, also told the International Trade Committee the City would need to devise a unique solution ensure firms still had access to EU markets post-Brexit.
Chris Cummings, chief executive of The Investment Association, cautioned attempts by other European cities to steal away the financial capital crown for themselves could result in the sector becoming scattered, disjointed and ultimately less powerful.
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"The greatest danger is fragmentation, not only to capital pools but to talent," he said.
Euro clearing has previously been earmarked as ripe for the picking from the Brexit fallout, especially given the UK had to fend off a legal battle to return the industry to the eurozone pre-Brexit vote.
"If the EU 27 wish to pursue a move to repatriate [clearing] then the result of the ensuing fragmentation would not help EU 27 corporates," warned Gary Campkin, director of policy and strategy at TheCityUK. "It is an issue they need to think very, very carefully about."
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Those speaking today also told MPs that a transitional arrangement was vital for all involved.
"This cliff-edge scenario is really damaging for both sides," said Heath. Campkin added: "It's really important for financial services to avoid what has been termed as the cliff-edge."
Several high-profile figures, including Bank of England governor Mark Carney and junior Brexit minister Lord Bridges of Headley, have already expressed the view that a bad Brexit deal would be as damaging, if not more so, for those located on the east of the Channel.
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Anthony Browne, chief executive of the British Bankers' Association, warned the current definition of equivalence would not provide stable access to EU markets, noting many firms needed a framework where the "tap can't suddenly be turned off by politicians in another country", and the UK would therefore have to work towards for a more bespoke solution.
Many in financial services have voiced concerns that Brexit will spell the end of passporting, a complex set of rights which currently provides UK firms with access to the EEA and vice versa.
However, the experts also told MPs the UK's departure from the EU gave the country a chance to rethink some regulation which was disliked across the City, such as the bankers' bonus cap.
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Earlier today, TheCityUK published a report arguing Brexit could be used as a once-in-a-generation opportunity to redesign policy to boost trade in the UK.
Speaking to the MPs, Campkin said the future of the country's trade policy would be "a balance between looking at the market access we have with the EU but also looking at developing and emerging economies elsewhere in the world… it's one of the biggest opportunities coming from Brexit".
Heath added: "In five years time, in ten years time, I can't see how it will make sense for us to maintain the entirety of EU regulation for financial services, given that some of this regulation isn't working very well for the UK."
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However, Cummings warned against diverging too far from other countries' standards, as regulatory cohesion "reduces the frictional cost [for global businesses] and also the ability for firms to trip over local regulatory requirements".
Cummings added the UK could unwittingly "shoot itself in the foot" if its red tape differed too much from other economies.
Many have warned Brexit could result in thousands of job losses. A report by TheCityUK published last October cautioned as many as 75,000 jobs could be lost from the UK if the country plumped for a so-called hard Brexit.
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Meanwhile, bank bosses from UBS and HSBC recently warned they would have to move around 1,000 jobs out of London each as a side-effect of the Leave decision.
However, Heath was doubtful the financial sector would shed as many jobs post-Brexit as some other commentators had suggested. "Far more jobs were lost in the City during the financial crisis," he said.