Brexit latest: City of London ‘will suffer’ as result of the EU referendum, says Morgan Stanley president

Colm Kelleher said some firms will pull their headquarters out of the UK unless passporting arrangement are retained

‘You'll see a slowdown in investment into the UK because people, corporations, like certainty before they invest,’ Colm Kelleher said. (Getty)

The president of US bank Morgan Stanley has warned that London’s financial services will be hit by the UK’s vote to leave the EU.

In an interview with BBC Radio, Colm Kelleher said that the uncertainty surrounding the negotiations over the exit process from the EU will slow down the investment into the UK.

“It is that uncertainty which is causing problems, you’ll see a slowdown in investment into the UK because people, corporations, like certainty before they invest. So the sooner we get some clarity on where we are heading, the better,” he said.

“I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much,” he added.

Andrew Tyrie, the chairman of the Treasury Select Committee, revealed the scale of the threat to the UK’s financial services sectors on Tuesday saying almost 5,500 British firms hold at least one passport to do business in another member state of the EU or the wider European Economic Area (EEA).

It is the first time that the number of companies that will be hit by a “hard Brexit” option – favoured by some leading Conservative Eurosceptics – has been set out.

Mr Kelleher warned that some companies will pull their headquarters out of the UK unless passporting arrangements are retained.

“I'm convinced that London will retain its reputation and prestige as a global financial services centre, but clearly some size of our businesses will have to be moved out of London into Europe, into European headquarters, with the absence of any passporting agreement,” he said.

In July, James Gorman, the chief executive officer of Morgan Stanley, said Britain’s decision to leave the EU bloc means Morgan Stanley will need to set up headquarters on the continent and potentially reshuffle some of its employees.

“Clearly we and other banks will have to have a European-style headquarters in one of the major markets, whether it’s Frankfurt or one of the other cities there,” Gorman said.

Morgan Stanley’s warning came as the Organisation for Economic Cooperation Development (OECD) slashed its 2017 growth forecast for the UK in half as a result of the Brexit vote in its latest economic outlook.

The institution now expects 1 per cent GDP growth in 2017, down from 2 per cent in its June forecasts.