As a former practitioner, I just wanted to comment on fears that if Britain is isolated within Europe then there is a danger of our financial services business drifting away to Frankfurt.Briefly, I very much doubt that will happen any time soon- whatever happens to Britain’s position within the EU. London simply has too many long standing advantages as a financial centre, many of which Frankfurt doesn’t have:*We speak English, which is the language of international finance.* London has a very extensive and long established network of legal and professional services.* Practitioners like to live in London from a quality of life perspective.*There is a deep pool of employee expertise.* Many existing contracts incorporate UK law, and the UK legal system is widely trusted as reliable, impartial and experienced in resolving financial disputes.* Whatever the rhetoric, in practice successive UK governments have been supportive of the City of London and welcoming to international finance businesses being based here.* Our personal and corporate tax policies are still more financier friendly than those of most EU countries.FWIW, I’ve been closely involved in running brokerage businesses both in the UK and in Germany. Frankly, once you’ve done that it becomes pretty clear why Germany is unlikely to become too much a threat to us in the financial services sector any time soon. To someone used to London or New York, the German legal system can seem somewhat weird and unpredictable, and the employees often seem to be a bit, well, naive in international financial terms. I’ll give you an example - in the UK, if as a business you do something wrong vis-a-vis shareholders or staff then, fine, they can sue you for damages. But in Germany the Courts actually stop you doing it. I’ve seen crucial decisions at German AGMs (which often go on for several days) blocked for months by the courts because microphones weren’t working in the meeting rom toilets (really!). That just wouldn’t happen in the UK. It might sound trivial, but when you’re trying to operate a fast moving financial business hiring and firing staff and taking quick strategic decisions, it’s certainly not.And broadly speaking, the political climate in Germany and France to an extent seems more hostile to “finance” and not always appreciative of market realities. The recent fiascos over Eurozone countries banning Sovereign CDS trades and seeking to impose losses on sovereign bond holders (the latter now reversed) are examples. The proposed financial transactions tax would be even worse. If the Eurozone want to do that then fine, but they’ll simply drive more business into London. In a worldwide market where financial products are increasingly fungible and traded cross market, it seems simply ludicrous for the Eurozone to think they could impose such a tax and not lose a huge amount of the trade to more tax friendly jurisdictions. To me, it seems difficult to believe they can actually be serious about this. But maybe they are.One can agree or disagree with Cameron’s veto on wider political grounds. But it seems pretty obvious that the Germans and French were intent on pushing through changes and regulations which would in time have severely reduced the City of London’s competitiveness. In resisting that, Cameron will have increased, rather than diminished, international confidence in London as a financial centre. Perhaps he could have achieved the same thing by more subtle means than the blunt use of a veto. I don’t know, I wasn’t there. But he certainly hasn’t done the City any harm. A
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