Brexit
It’s relentless
The media coverage of Brexit is dominated by the...
...twists and turns of daily politics
Will we get a deal Brexit?
Nobody knows the exact cost...
...of risk around the Brexit deadline
It’s drowning out a lot of important stories about the...
...impact Brexit is set to have...
...on Britain, Europe and the rest of the world
We want to get to grips with one of those stories...
...about what Brexit could mean for our financial systems
Ok, so Brexit—a fast moving story
Obviously everyone in this country has...
...huge amounts of Brexit fatigue
Most of the top regions that people are searching for Brexit...
...and information around it...
...most of them are in Europe
There is big research done by the European Parliament...
...called The Eurobarometer
Most of the European countries don’t really want to know...
...about bureaucratic decisions and the intricacies of politics
They are all looking into business, trade...
...and probably this is a subject that...
...really interests people in Europe
How is it actually going to work in terms of economy?
To better understand what’s at stake here...
...we spoke to Chris Lockwood...
...The Economist’s Europe editor
Well it seems to me there’s two sort of ends to it
One is what the effects on Britain are going to be...
...and the other is what the effects on Europe are going to be
The effects on Britain and Europe are very different
I mean the effects are going to be much more severe for Britain than Europe
And that’s worth exploring because Britain has...
...always tried to argue that they need us more than we need them...
...which is obviously complete nonsense...
...based on a complete misunderstanding...
...of the way trade flows work
But then you get into other difficult areas...
...like surrounding the City of London
Financial services, those aren’t trade barriers or they’re not goods...
...but there you’re into whole regulatory problems where...
...because we won't be part of the single market anymore...
...our banks will no longer be treated as being...
...sort of equivalent to European banks
And whereas in the past, if a European country tried to discriminate...
...against our banks and not allow our banks access to bits of their market...
...we could always sue in the European Court of Justice
Now we won’t be able to
Many cities can claim to dominate industries
Silicon Valley in California, the centre of technology
For electronics, head to Shenzhen in China
The leading hub for outsourcing is Bangalore, India...
...and London hosts one of the world’s largest international financial centres
Tamzin Booth has been reporting on business and finance for a long time
She’s The Economist’s Britain business editor
Within just a square mile here on the banks of the Thames...
...companies can do so many things
A multinational can sell $5bn-worth of shares in 20 minutes...
...a startup can raise seed capital...
...from Asian pensioners
A company can insure a pop star’s vocal cords...
...or the risk of a hurricane hitting
So how important are these services for other countries...
...especially in Europe?
Well relations between the City of London and Europe...
...are particularly intimate
French and Italian firms often go to London to meet investors...
...or organise a takeover
Some 90% of European interest-rate swaps...
...are cleared through the City’s plumbing
So the global economy is inextricably linked with London
But Brexit threatens to undermine its global standing
Since the Brexit referendum more than 300 financial firms...
...have decided to relocate or set up shop elsewhere in Europe
And soon thousands of workers from London...
...will be crossing the Channel to staff new offices
They are moving to multiple cities across Europe
Dublin is set to be a hotspot for asset managers
Frankfurt is the bankers’ favourite...
...attracting 43% of bank moves from London
And trading firms are likely to favour Amsterdam
And for all of these cities, new business means new money
By one estimate, £1trn in assets could leave Britain
We wanted to find out how two European cities...
...Amsterdam and Dublin...
...have been honing their sales pitch to lure those assets away from London
Hello
Let me first say that...
...we actually hate to see Britain leave the European Union
So we are not very enthusiastic about that whole idea
But in Amsterdam we have a very good digital infrastructure...
...which is for instance, for fintech companies, very interesting
In Dublin, we’ve been a European financial centre...
...now for more than 30 years
The fact that we’re close to London...
...that we’re English speaking...
...that we’re a common-law jurisdiction...
...really appeals
We have lots of internationally oriented talent
Close to 90,000 people working in the industry...
...both foreign and domestic in Ireland
People speak many languages, which is attractive
And we also have good accessibility...
...in terms of Amsterdam is near the airport
So what does this exodus mean for the future of Europe’s financial system?
Research I’ve been reading from think-tank, New Financial...
...concludes that Brexit will take the entire...
...financial-services industry backwards
Hello, how are you?
Good, very well
Over the past 20 years anything that can be moved...
...to London has been moved to London because...
...it’s so much more efficient for a large bank to run...
...its operations in one financial centre and sell them across border...
...sell them remotely to customers in the rest of the EU...
...than it is to have...
...15 offices with 15 separate management structures...
...sprinkled and spread across Europe
And what Brexit is doing, or at least in part...
...is rewinding some of the progress that has been made...
...rewinding that process over the past 20 years...
...and forcing firms to shift more of their business back...
...to the EU and have a stronger local presence
So what is the future of London?
When you look back over the history of London as a financial centre
...you know it came to dominance because of its unique position...
...as a global financial centre
It helped fund the railway network in what’s now the United States...
...far more so than it helped fund the railways...
...in what’s now France and Germany
So I think we’ll see London sort of moving back...
...to perhaps its sort of...
...its longer-term historical role...
...of being a global international financial centre
London currently ranks 2nd in the Global Financial Centres Index...
...only after New York
The highest euro-zone city is 15th on the list
Cities like Frankfurt and Paris will be catching up with London post-Brexit...
...but they probably won’t overtake
And any gains they do make at London’s expense...
...might prove to be a hollow victory...
...as Tamzin explained
Ultimately for the euro zone...
...the costs of having a less efficient financial system...
...and sort of higher cost of funding are really likely to outweigh...
...the benefits of grabbing some bits of business from the City
The annual bill for every 0.1 percentage-point...
...increase in the cost of euro-zone firms’ funding equates to €32bn...
...or 0.3% of the whole euro zone’s GDP
How is the City of London going to navigate Brexit?
Well the City could keep a lot of its access to the EU...
...if it agreed to be largely regulated by it
But British regulators rightly fear handing a lot of control to the bloc...
...especially if the euro zone’s unspoken goal is to shrink...
...the City of London and really boost Paris and Frankfurt
So as countries across the EU start to weigh the...
...financial consequences of Brexit...
...what about the political conseqeunces?
We’ve been exploring those too...
...and they’re not necessarily what you might expect
The people are slightly more optimistic now, than before
So I think the Italians are trying to hope for a better future for the EU
Obviously nothing is for granted...
...we’ll still have to fight every centimetre...
...of ground to actually defend the European Union
But I feel there is a bit more optimism...
...and that’s a good sign
That was the founder of a new pan-European movement called Volt...
...which features in another of our films...
...exploring how the Brexit vote is changing the EU
You can watch that film if you click on the link opposite
The other link will take you to The Economist’s latest coverage on Brexit...
...and also some of the data and research we used whilst making this film
Don’t forget to subscribe for all of our latest releases...
...and thanks for watching
...other European countries view the EU
I founded Volt because of Brexit...
...Brexit was the first spark that told me...
...that our European values were in danger
I figured that something was needed...
...to try to steer the direction that the UK...
...but not only Europe as a whole was taking
And so the idea of creating something European...
...a European political movement
We dream about a Europe that is more united...
...more cohesive where countries are not left behind
But Andrea has his work cut out for him
That’s actually the start of another film...
...which you can watch by clicking on the link opposite
In it we explore how Brexit has had some surprising effects...
...on anti-EU sentiment
Click the other link if you want to look at...
...The Economist’s latest writing on Brexit
Thanks for watching...
...and make sure to subscribe to get all our latest releases