The big news of the week (and arguably the year) is that Boris Johnson’s Conservative party have secured a historic election victory, and that his Brexit deal has the mandate it needs to get through the commons. The political gamble paid off, and now Brexit is happening.
Some of the leading names in the city greeted the result warmly, claiming it as an opportunity to deliver on infrastructure spending (and to keep Jeremy Corbyn, who did not seek much popularity in the City, out of Downing Street).
Despite Johnson’s apparently hard-line approach to Brexit, many city bosses are confident that he will pursue a softer approach. Mike Rake, a former president of the CBI, claimed that the size of the majority would leave the Prime Minister less reliant on the support of Conservative hardliners in the European Research Group. “Boris will be able to drive an agreement closer to the EU and with a sensible transition period” he claimed, adding that the period in question should be at least three years.
The services sector, including financial services, makes up some four-fifths of the UK economy, and it’s therefore vital that any deal with the European Union protects services.
Every year, trillions of dollars-worth of currency and derivatives flow through the City of London. While some amount of disruption is inevitable, much of that disruption has already been priced in – which might partly explain why the FTSE100 saw a sudden jump the moment the exit poll was revealed at 10pm on Thursday.
Whatever happens, it is highly unlikely that the City of London will fail to survive Brexit. Rival financial centres on the European mainland suffer structural disadvantages compared with London, such as the language barriers, and these aren’t going to go away even if no Brexit deal can be reached. There are also legal complications, ready to be unpacked by firms like Withers.
Regulatory alignment between the EU and the UK would allow financial centres to continue trading with minimal disruption. On the day of the General Election itself, Brussels also quietly announced that it would give the derivatives industry more time to prepare for a potential no-deal scenario, allowing emergency market access for twelve months after the day of any no-deal Brexit. This has provided firms both in London and in Europe with the certainty they need to plan for the future.
