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25th Sep 2022

Breaking up City of London would be 'huge mistake'

  • The City "would not and could not be replicated anywhere else", said finance minister Hammond (Photo: EUobserver)

It is in interest of both the United Kingdom and the European Union to keep London's financial services industry broadly the way it is after Brexit, the UK's finance minister said Thursday (8 September).

“I believe that the structures that we have in London - with its very complex ecosystem of banks, funds, insurance companies, law firms, business services firms - would not and could not be replicated anywhere else,” chancellor of the exchequer Philip Hammond told members of the House of Lords' economic affairs committee.

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  • Hammond (r): from foreign affairs minister to chancellor of the exchequer (Photo: council of European Union)

He gave other governments in a veiled warning not to try and profit from Brexit by luring financial services from the City.

“To break it up, or to try to damage it in the pursuit of some very narrow and hypothetical national advantage would be a huge mistake for any of our European Union partners to follow,” he added.

It was Hammond's first appearance before a UK parliamentary committee since he was appointed in July by the country's new prime minister, Theresa May. Hammond previously served as foreign affairs minister.

He noted that despite what has “probably become quite fashionable among public opinion to think”, financial services “exist to support the real economy”.

“London's financial services market supports the real economy across Europe, not just in the UK,” said Hammond.

The minister added that the discussion on Britain's future relations with the EU should move beyond thinking along the lines of existing models.

“The UK is not Norway. It’s not Switzerland. It’s not even Canada. We are the world's fifth largest economy,” he said.

However, he also touched upon what will become one of the most difficult topics for negotiation, the relation between the so-called four freedoms in the European Union: freedom of movement of goods, services, capital, and people.

“It's clearly in our interest and I would suggest in the European Union's interest as well to have as free and open access to each other's markets, not just in financial services but in other trade areas as well,” said Hammond.

“But we cannot accept uncontrolled free movement of people. That's the political outcome of the referendum decision that was made.”

British citizens voted to leave the European Union in a referendum last June.

Formal negotiations have not yet begun, however. The remaining EU member states and the European Commission have taken the position that the UK first needs to trigger Article 50 of the EU treaty, which kickstarts the two-year negotiating period to settle the divorce.

The phrase “No negotiation without notification [of article 50]” has become some kind of mantra in Brussels, but a group of British expats on Thursday announced they would challenge that principle.

The group, which calls itself Fair Deal for Expats, said it will launch a complaint at the General Court of the European Union over a ban by EU commission president Jean-Claude Juncker from holding informal talks on Brexit.

Days after the referendum, Juncker said that he had issued a “presidential order”.

“I have forbidden commissioners from holding discussions with representatives from the British government,” he said. “I have told all the directors-general that there cannot be any prior discussions with British representatives.”

A spokesman for the campaign criticised Juncker's “dictatorial-style bullying tactics”.

“Mr Juncker is urging Britain to trigger Article 50 sooner rather than later, but he’s not entitled to issue edicts preventing the UK from having discussions with the commission. He’s forgetting that the UK is still a member state,” the spokesman, John Shaw, said according to a press release.

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