David Lascelles

The director of the Centre for Study of Financial Innovation replies to Ken Livingstone's argument that London can't survive as a leading financial centre outside the euro
Click to follow
The Independent Online

Nearly two years after the eurozone countries locked their currencies, London's share of world finance business has actually increased, so much so that it handles more international euro-denominated transactions than Paris and Frankfurt put together.

The fact is that London offers a far more hospitable and stimulating environment for the finance business than Continental centres, which are increasingly handicapped by the moves towards regulatory and fiscal harmonisation that the euro entails.

Furthermore, the eurozone's attempts to create more open, market-driven economies is stimulating demand for precisely those skills in which London excels: corporate finance, capital market trading and fund management.

True, the bund futures contract shifted from Liffe to Frankfurt. But that had nothing to do with the euro: it was purely a matter of where the contract could be traded most cheaply. That lesson has now been taken on board.

Ken Livingstone is behind the times: the City debated last year whether its long term interests require Britain to adopt the euro. Its conclusion was that it will not suffer in the slightest. [Bank of England governor] Eddie George and the then Lord Mayor both said at the end of last year that far from losing business, the City had prospered while Britain stayed outside the single currency.

Mr Livingstone's proposal to devalue the pound to enter the euro is also old-fashioned. That policy of devaluation saw British industry fall behind its German and Japanese competitors. Fortunately he will not shift the commitment of the Government and the Bank of England to controlling inflation, not managing the exchange rate.

So, far from losing out, the City's position outside the euro will ensure that its attractions as a financial centre will increase, not diminish.