Britain’s finance industry will emerge stronger from Brexit, remaining one of the world’s top financial centres, ministers in Prime Minister Theresa May’s government forecast on Monday.
Since Britain voted to leave the European Union three years ago, London’s financial services industry has been jolted by the prospect of ending four decades of regulatory integration and losing access to the bloc in one fell swoop later this year.
London, which is home to the world’s highest number of banks and largest commercial insurance market, potentially has a lot to lose from the end of unfettered access to the EU’s post-Brexit market, its biggest trading partner.
But Liam Fox, the British trade minister, said the demise of London’s finance industry, known as the “City of London” has incorrectly been forecast during the last three decades and every time it found new ways to reinvent itself.
“Time and time again doom-mongers have predicted the demise of the City and time and time again they have been proved wrong,” Fox told an audience at the medieval Guildhall, built above a ruined Roman amphitheatre in London’s traditional financial heart.
“I am convinced that once the dust settles, the City of London will do what it always does, which is to emerge fitter, stronger and more dynamic than ever.”
At the turn of the century, some financial sector executives warned the failure to join the euro would lead to a withering in London’s role as a hub for business. And after the 2007-09 financial crisis many banks also threatened to move overseas.
On both occasions, Britain’s finance sector expanded, although many banks, insurers and asset managers in London in the past year have shifted some staff and activities to new hubs in the bloc to maintain access to the EU.
The finance industry remains deeply unpopular among the general public for its role in the financial crisis. But Fox said the government values the sector, which accounts for about 12% of Britain’s economic output, employs about 2.2 million people and pays more taxes than any other industry.
“Those who threaten the City’s viability or stoke up resentment against the sector should remember how much it pays the bills,” he said.
British financial services minister John Glen said the City of London’s traditional strengths were in good health, with new sectors such as fintech growing.
But the “slow and frustrating” process of seeking a deal in parliament on Britain’s departure from the European Union remained a “stubborn” shadow over the sector, Glen said.
“I know the City wants and frankly deserves certainty, and I am sorry that I can’t give that today,” Glen said.
Barclays’ bank former chairman John McFarlane said the City cannot take success for granted, especially if the EU closes its markets to Britain, and foreign financial firms are forced to move activities from London to the bloc.
Bernard Mensah, the president of Bank of America Merrill Lynch in Europe, the Middle East and Africa, said his bosses in the United States were bemused Britain’s decision to leave the EU and it diverting attention from bigger challenges.
Mensah said the best strategists, lawyers and staff working in technology were working on preparing his bank to be ready for leaving the EU.
“There is a real underlying cost,” he said. “The challenge that we face as a region, as an economy, and as an industry are huge and we are distracted by focusing on Brexit right now.”
Catherine McGuinness, the political leader of London’s historic financial district, said the industry is exasperated with the uncertainty surrounding Brexit, which has hurt Britain’s image abroad and will take time to rebuild.
“The biggest issue is we don’t know what country we are anymore,” she said.