The defenders of Brexit baptized ten years ago now, during the campaign prior to the referendum to leave the United Kingdom from the EU, as “project fear” (project fear, in the original in English) all the forecasts of economic catastrophe that think tanks, analysts, experts and David Cameron’s own Government predicted if the threat was consummated. That overreaction played against those in favor of remaining in the community club, because it did not respond to the nature of things for an economy as powerful as the British one to go bankrupt like a company could. Reality is much more diffuse, slow and permeable, and is affected by multiple factors, such as in this case a pandemic and an energy crisis. No one questions at this point that Brexit has had a negative balance for the United Kingdom. But the sadness, in this case, goes by neighborhood. If small and medium-sized companies focused on importing or exporting have seen their business with the continent collapse, due to an unbearable increase in bureaucracy and customs controls, the City of London, the financial center of the British capital and still to a large extent of Europe, has managed to successfully overcome the worst omens. If before the referendum there was talk of a loss of up to 200,000 workers in the financial services sector, because banks and funds would relocate staff to other European places, the reality of the figures has been more modest. It is estimated that approximately 40,000 jobs were lost this decade due to Brexit, according to an independent study prepared by the office of the Lord Mayor of London. There are many, undoubtedly, but not a catastrophe if one takes into account that the financial sector of the British capital employs three quarters of a million people. The lower strength of London is due to many of the same causes that also cause less strength in other European places, and has to do with the weak response to the unstoppable advance of the large American banks and with the economy of that country, which the technology sector has put in competition with giants like China. And that same revolution has meant that London has not completely lost its magnetism. “In twenty years, Brexit will be a footnote in the history of financial services in this city,” Irishman Vincent Keaveny, who then held the position of Lord Mayor, told EL PAÍS five years ago. «The true engine of change has been technology. We see it every day. Companies change, develop new ideas and new jobs, and everything is driven by technology,» he said then.
The push for deregulation
But the British stock market has not witnessed large IPOs or the emergence of technology giants during these years. Its advantage over the continent has resided in a deregulation favored by governments, which could be endangered if Downing Street’s current desire to align its regulations more closely with that of Brussels continues. London continues to lead the sector in trading currencies, international interest rates and their derivatives. It is strong in cross-border banking claims, foreign banking assets and international debt issuance. It maintains the second position in the world in asset management of investment funds, foreign direct investment and investment in fintechs, according to data from the New Financial think tank and analysis center. London’s losses, like those of other European cities, have to do with the emergence of financial locations such as Singapore, whose strength is much greater than ten years ago; or with the attraction of many millionaires to Hong Kong or the installation of large funds in a place as booming as Dubai. The great danger of Brexit has not been so much that of letting go of ties with Europe as that of being outside at the moment when the EU heeds the Draghi Report and creates a true single financial and banking market to which London, for its own survival, will have to get as close as possible again. You can consult other letters in this section here.
