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Originally Posted by jmecklenborg
I'm not an expert but it appears that London's position as Europe's financial capital is ensured as long as its financial services enjoy the advantage of the independence of the British Pound. England's former EU membership was incidental to the ability of its banks to coordinate with the Bank of England on interest rates and other matters. France and Germany gave up all hope of one of their cities challenging London the moment they established the Eurozone.
Switzerland is still independent of the Eurozone, of course, but it does not seem to have a large enough domestic economy or the advantage of a former empire that speaks its language.
My company here in the U.S. occasionally buys things from companies in Switzerland and they send us quotes in Euros, not Swiss Francs. England never does this - the quotes are always in pounds.
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The pound really doesn’t have anything to do with it, except for domestic flexibility to use both monetary policy and fiscal policy to manage growth and inflation, whereas Eurozone countries need to apply a “one-size-fits-all” approach that may not always be optimal (e.g., when the German economy is humming and the Greek one is a mess, but the latter cannot independent loosen its monetary policy to boost growth).
In any event, London’s pre-eminence as a European financial center pre-dates the Euro. There was a strong legacy from the British Empire, but there were other financial centers in Europe. What really made it take off was the so called “Big Bang” under Thatcher in the 1980s, which liberalized rules. All the American investment banks came, started hiring like crazy, and made London their European/“International” HQ. Of course, those American banks were not doing this just because the British economy itself was so attractive, nor were they hiring only British financiers and traders. They couldn’t have done, there aren’t enough of them. The UK was of course part of the EEC, the predecessor to the EU, already.
London will almost certainly continue to be the largest single financial center in Europe for the foreseeable future. It’s got the advantage of language, the best time zone to work with the US and with Asia (though of course Europe is only an hour ahead), and all the infrastructure in place. But the last just means that change has to come slowly.
The risk of course is loss of talent pool if all those Europeans can’t, or more likely don’t want to, establish their careers/lives/families in London anymore after Brexit. This is not at all like American expats coming to do a stint in London, or Hong Kong, or wherever for a couple of years. To be the financial capital of Europe, London needs Europeans to move here in their 20s and stay until they’re retired - and they need to find wives and social networks and cultural touchstones as well. Promises from the government that highly-paid bankers will be able to get visas doesn’t accomplish that, obviously. It has to be a pan-European city.