Realist, not conformist analysis of the latest financial, business and political news

The Trivial Damage Brexit Will Do To The City

Frankfurt is proudly boasting that as much as €800 billion in assets is going to move over to that fair city as a result of Brexit – out of The City, of course. Well, actually, not quite, the management of that many assets will move. To which the correct response is so what? Or even, you and whose grandmother? For in the context of these sorts of things that’s a trivial number. Financial centre numbers are measured in the tens of trillions, not mere billions. We’re thus rather boasting about small willies here:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] London will lose up to to €800bn (£700bn) in assets to rival financial hub Frankfurt by March 2019 as banks start to transfer business to the German city before Brexit day. The lobby group Frankfurt Main Finance released the figure after it was confirmed that 30 banks and financial firms had chosen the city as the site of their new EU headquarters. [/perfectpullquote]

It’s worth noting what people are actually doing. In order to get around the limitations of a no deal exit it’s necessary to have an office. Which has a couple of people in it, which nominally manages those assets. That could then still be doing all the trading in London, the clearing in London, the stuff in London. You need a brass plate that is. Which is what people are indeed setting up on the basis that no thrusting young banker worth their salt would be seen dead living in Frankfurt.

But, you know, willy waving.

But even then, is this a big number or not?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] However, the Investment Association (IA), the trade body, said that £9.1 trillion worth of assets are now being managed by fund houses, hedge funds and private equity firms in the UK – an increase of 12pc in the last 12 months. Despite concerns surrounding Britain’s exit from the EU, it also said that money from overseas clients had increased… [/perfectpullquote]

Note that that’s not including the banks themselves. Nor the metals markets, derivatives, insurance an so on. And then:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Britain has the largest foreign exchange market and the second largest derivatives market in the world, accounting for just under 40 percent of the world’s dealings in those markets, while Paris, London’s nearest EU rival, handles under 5 percent, according to the Bank for International Settlements. Each year, euro, yen and dollar trades worth about a combined $869 trillion happen in London – more than in all the euro zone countries combined – according to the City of London Corporation. [/perfectpullquote]

That’s not assets, that’s turnover. But still, €800 billion’s not all that much to write home about, is it?

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