Firms looking for 'new London' to replace city as financial hub after Brexit

As many as one in five businesses surveyed by the Institute of Directors are considering moving some of their operations outside the UK

It is likely to be harder for London-based businesses to serve European markets after Brexit
It is likely to be harder for London-based businesses to serve European markets after Brexit

Firms are already on the hunt for the 'new London' after the decision for the UK to leave the EU has left many businesses wondering over their future in the capital.

As many as one in five businesses surveyed by the Institute of Directors are considering moving some of their operations outside the UK.

Vodafone, the seventh biggest company on the FTSE 100, has cast doubt over whether it will continue to keep its group headquarters in Paddington if it will no longer have access to the single market. The company said its Vodafone UK headquarters in Newbury were not affected.

“It remains unclear at this point how many of those positive attributes will remain in place once the process of the UK's exit from the European Union has been completed,” a spokesman said.

Goldman Sachs, the US investment bank, is also not ruling out a move.

Richard Gnodde, the co-head of the investment banking division of Goldman Sachs, said that “every outcome is possible” when asked if the bank plans would involve moving some of its employees to Eurozone cities in the wake of the EU referendum.

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Many other firms have reiterated their commitment to stay - at least for now.

Jes Staley, the chief executive of Barclays, has said the bank has no plans to move people out of the UK because of Brexit.

Meanwhile Douglas Flint, chairman, told City executives that the referendum result would not trigger another review into whether to move HSBC overseas. A review that concluded in February said that HSBC should stay put.

These companies have good reasons to stay.

London has frequently topped the rankings of the best global cities to do business in. It was named the best city in the world for businesses by the City Moment Index in January for its economic growth and real estate structure.

London was pulling ahead of New York as recently as March, when Deloitte declared that London's 1.71 million skilled jobs showed that it was growing faster than anywhere else in the world.

London is frequently cited as the top global city because it speaks English, the language of business. It is perceived as being soft on regulations governing business, meaning there are fewer barriers. And it is culturally rich, with excellent museums, restaurants, schools and other services that attract businesspeople from abroad.

But it is likely to be harder for London-based businesses to serve European markets after Brexit.

London is likely to lose its dominance in euro-denominated wholesale banking, or banking to mortgage brokers, mid-sized companies and real estate companies in euros. Many Eurozone companies and institutions have long wanted this activity to move to the Eurozone and be overseen by the ECB.

It might also lose its dominance in derivatives, a highly portable financial industry, if clearing houses are moved to Europe. Clearing houses in London stand between the buyers and the sellers of derivatives trades in a global market worth $493 trillion. They have become a vital safeguard to protect traders since the Lehman Brothers collapse in 2008.

Where would they go?

"The most likely beneficiaries in the EU are Paris, Frankfurt, Amsterdam and Dublin," Greg Irwin, chief economist, if a report released by Global Counsel.

"But they cannot replicate overnight the advantages of the London ‘ecosystem’ supporting financial services, including skilled staff, legal services and market infrastructure," he said.

That means its going to take time to find the "new London" as businesses count the cost of the referendum result and start to look to other financial centres overseas.

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