EU snub as Barclays urges City of London to focus on US and Asia instead of Frankfurt

Dominic Raab dismisses EU threat to City of London

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Earlier this month, Bank of England Governor Andrew Bailey warned the EU against mounting a raid on the City of London, saying the “Old Lady” will “resist very firmly” any attempt by Brussels to force financial trading worth trillions of pounds to relocate after Brexit. Amid mounting speculation that EU officials could force more financial business moves within its borders, Mr Bailey said steps forcing the relocation of euro derivatives, otherwise known as financial instruments, would represent a “serious escalation”. The EU granted the City of London temporary equivalence for derivatives clearing, enabling the activity to continue after the end of the Brexit transition.

The UK had hoped to obtain full equivalence from Brussels for clearing and other financial activities and is in talks to produce a post-Brexit memorandum of understanding, due next month.

However, Mr Bailey said the EU’s recent attitude suggested that equivalence was a “sideshow” and the bloc’s real agenda seemed to be a “location policy” of shepherding as much lucrative financial services activity out of London and into the bloc as possible.

In a recent interview, the boss of Barclays – the British multinational investment bank and financial services company – did not seem too worried about the lack of equivalence.

Jess Staley claimed the UK financial services industry should focus on competing with the US and Asia rather than the EU.

He noted although jobs that would have been created here have been moved to the EU, Brexit gives one of the UK’s most important sectors the chance to define its own agenda.

He told the BBC: “I think Brexit is more than likely on the positive side than on the negative side.

“What the UK needs and London needs, is to make sure that the City is one of the best places, whether [it is in terms of] regulation or law or language, or talent.

“I think what London needs to be focused on is not Frankfurt or Paris, [it] needs to be focused on New York and Singapore.”

However, he said he was not a fan of widespread deregulation to achieve that.

He added: “I wouldn’t burn one piece of regulation.”

On the contrary, he said the UK’s robust regulation was a major strength, not weakness, and described the recent clampdown on firms offering buy now, pay later schemes as reassuring.

He said: “You see what’s happening right now with buy now, pay later, you know, the FCA is going to come in and start to increase the regulation of that marketplace. That’s the right thing to do.

“And, in a funny way we’ve got pretty good at working inside the regulatory framework that is here.

“It protects the financial industry in London as we learn how to deal with this regulation, and it makes the bank safer.”

He admitted money and jobs have moved from the UK as a result of Brexit, but emphasised the impact has been modest.

He added: “Yes, there are some jobs that are going to Europe, that otherwise would have been in the UK, but it’s in the hundreds. Barclays employs some 50,000 people in the United Kingdom, roughly 20,000 outside of the UK and 10,000 in the US.

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“Some amount of capital has moved but London is still obviously the main centre for Barclays.”

Despite Mr Staley’s advice on regulation, Chancellor Rishi Sunak appears to be seriously considering slashing red tape.

Lord Jonathan Hill – who served as EU commissioner for financial services until the Brexit vote – was commissioned by the Government to come up with 15 recommendations aimed at turbo-charging the City.

In his review published this week, Lord Hill called for a range of deregulatory measures that would aim to “ensure the UK remains one of the most attractive places to grow and list successful, innovative companies”.

The report, which is believed to have been very well received by Mr Sunak and Prime Minister Boris Johnson, suggests opening up London to Spacs (Special acquisition companies), the so-called blank cheque firms that have become one of the most popular trends in finance.

Lord Hill also called for a swathe of deregulatory measures that would make London a more enticing destination for companies to go public, while also giving more power to start-up founders after listing on the London Stock Exchange.

In his Budget speech on Wednesday, Mr Sunak welcomed the report, saying: “Let me thank Lord Hill for leading this landmark review.

“The Financial Conduct Authority (FCA) will shortly be consulting on his proposals.”

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The Chancellor also noted Lord Hill’s report “more than delivered” on proposing “bold ideas” on how to improve the City’s competitiveness in the long-term.

He added: “I’m keen we move quickly to consult on its recommendations, cementing the UK’s reputation at the front of global financial services.”

Similarly the FCA said it will “carefully consider” the recommendations and plans to make relevant rules by the end of the year, subject to consultation feedback.

Spacs are created to raise capital by going public, with the purpose of then acquiring an existing company.

They offer private companies a faster and more predictable way to go public.

Spacs have enjoyed popularity in the US – almost 180 have been filed in New York alone – but current regulation means that none have launched in London.

Financial services lobby group TheCityUK said it was in favour of all Lord Hill’s proposals, including the call to “liberalise” regulations to allow Spacs to list in the UK.

TheCityUK chief executive Miles Celic told City A.M.: “The UK has one of the world’s foremost listing regimes, but we cannot be complacent in the face of fierce competition from the US and increasingly from financial centres in Asia.”

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