Policy Chairman Catherine McGuinness speech at the London Stock Exchange Market
Good morning everybody. As the historians among you will know, coffee fuelled the earliest days of what became the London Stock Exchange. So it’s fitting to meet here, with so many people still fuelled by their morning espressos!
After a telegraph cable linked South America to New York to London, institutionalized access to information made fortunes – with London’s coffee exchange as one of the key centres.
150 years on, we’re still innovating. From coffee to clearing, London is global hub of expertise and experience, a reservoir – or cafetiere – of financial and human capital.
It’s in the interest of the entire world that this remains the case.
But that interest is particularly acute in the EU 27.
Like it or not, and most people do, London is Europe’s financial centre.
London’s capital markets also help to keep costs down within the EU’s borders, for tiny manufacturers and giant multinationals alike.
That’s why over 100 companies from EU member states have chosen to list here.
Why over 80% of Europe’s hedge funds are based here.
And why over a third of EU wholesale financial services activity is executed here.
Brexit is a challenge to that. But to describe it as an inevitable catastrophe is far wide of the mark – in fact it’s an unwelcome return to the exaggeration of the referendum campaign itself.
So yes, JP Morgan, for example, has doubled the size of their Dublin office. But that takes it from 500 to 1,000 – while its UK team is 14,000 strong.
Meanwhile, some of the world’s biggest companies, like Google, Wells Fargo and the Bank of East Asia, have all announced large-scale investment in the UK since last June.
But at the same time, we do of course recognise that Brexit is a big issue. And it’s important that the process doesn’t endanger jobs or impede growth.
That’s why the City Corporation, in conjunction with The City UK, is asking government to prioritise a Brexit deal which secures a bespoke deal delivering mutual market access between the UK and the EU…
… early agreement of transitional arrangements to provide vital certainty for businesses…
…. maintaining residency rights for EU nationals…..
…and assurance that the City remains open to talented individuals from across the world that have worked to make the City the world-leading place it is today.
My personal view, as someone who’s spent decades in financial and professional services, is this.
The EU is one of the primary beneficiaries of London’s capital markets. And seeking to fragment this offer – for example by cherry-picking clearing and other services – would not only be a huge risk, but an avoidable one.
Particularly, by the way, for the SMEs that employ two thirds of the European workforce and raised £5.3 billion through new and further issues of shares on the AIM market last year.
We all want to carry on nurturing innovation and entrepreneurship.
But for every obstacle erected in the path of free-moving capital, the higher the cost of that capital and, ultimately, the smaller the investment pool. That means less money available for growth companies, inefficient capital allocation and wasted potential across Europe.
On the flip side, the easier it is to invest across borders, the easier it is for start-ups to access vital growth capital. The success of UCITS, underpinned by delegation, has already shown this. It helps us attract investment from all over the world.
But in order to kick on, and make investment even easier, and capital markets even more efficient, we must keep sight of three things during Brexit.
One: we need to pursue Capital Markets Union for the benefit of businesses across Europe.
Two: we need to maintain current rules on delegating asset management functions standards, because limiting delegation as part of a broader Brexit settlement would harm both savers and investors.
And three: we need to protect centralised clearing, here in London, which makes it easier to net exposures and cheaper to post collateral.
If CCPs are required to relocate, costs will go up, liquidity down, and the ripples will disrupt global markets for a long, long time. And by the way, it’s worth noting that both Canada and Australia proposed but ultimately rejected similar relocation projects due to the risk to global markets.
The City Corporation and I are doing all we can to telegraph these facts to Government, to business and to the public. And we really appreciate the strident voice of the London Stock Exchange, led by the magisterial Xavier Rolet, whose face often beams out of the FT and whose words I have shamelessly quoted time after time.
So thank you, everybody, for coming this morning. Thank you for your support over the past twelve months. And thank you, too, for the work you do each and every day to help keep the global economy liquid, innovative and cost-efficient.
With your help, we can keep it that way.