Some of London's finance industry 'could be transplanted to New York'


London's financial services sector could not be immediately transplanted to "one place" elsewhere in Europe, but services could shift to New York, according to a key policymaker.

Sir Jon Cunliffe - the Bank of England's deputy governor for financial stability - told a House of Lords sub-committee that it would be "highly unlikely" in the short term that the capital's unique financial ecosystem would be recreated in likes of Paris or Frankfurt.

However, he said services could move to New York because its finance industry has the same qualities as London.

"A great deal of the business is not to do with the European Union; in fact, the minority of the business is to do with the European Union, so the idea that this ecosystem is transplanted somewhere else into Europe in the foreseeable future - over time I don't know - I think it is highly unlikely.

"Could it be transplanted to New York? Well, of course it already exists in New York. There's such a large and complex ecosystem there, so could some of the things that happen in London now transfer to New York, if they could no longer happen there, I think so."

Sir Jon's comments come amid mounting concern that a so-called "hard Brexit", in which Britain exits the European single market in order to take a tighter grip on immigration, will spark an exodus of jobs from the City of London to other key financial centres. 

According to TheCityUK, the cost of a such a move to revenues in Britain's financial services sector could be as high as £38 billion, with up to 75,000 jobs in the line of fire.

Sir Jon - a member of the Bank's nine-strong Monetary Policy Committee (MPC) which sets interest rates - said if Britain was not a member of the European single market then its "relatively frictionless" trade relationship with the EU would not continue in its current form.  

However, he said Britain could replicate a financial passporting system for trading with Europe, but it would have to embark on a "painstaking process", which would be part of a "much bigger negotiation" with the EU. 

The future of London's euro clearing services had become a political issue, Sir Jon added, stating that costs would rise if it was to "fragment" by moving elsewhere in Europe. 

He said if derivative contracts had to be cleared in the jurisdiction of the currency of issue then you would make "multi-currency infrastructure impossible". 

Speaking about volatility in the currency and financial markets since the Brexit vote, Sir Jon said the political uncertainty had been difficult for markets to process.

"I think the hardest news for markets to process is political news. I think markets find political uncertainty very difficult to estimate as opposed to economic uncertainty."

His comments come after sterling was put under sustained pressure last week after investors became increasingly alarmed that Prime Minister Theresa May was opting for a so-called ''hard Brexit''.

The pound capped off its torrid week on Friday with an overnight ''flash crash'' triggered by a suspected ''rogue algorithm'', which sent it plummeting to a fresh 31-year low against the US dollar.

Sir Jon said he would not rule out more market instability as news about Britain's Brexit negotiations became public.

Asked by the committee whether the Bank would intervene to prevent the Government triggering Article 50 if it did not think the nation was ready, Sir Jon said it was not in the Bank's remit to "mark the card" of ministers, but would continue to comment on the direction of the economy.