Posted September 13, 2016 Jugraj Deol
In an attempt to reassure the City’s financial services industry of protection during Brexit negotiations, Phillip Hammond pledged to maintain free movement for “highly-skilled businessmen and women” after the UK leaves the European Union. For the first time the chancellor revealed some sectors of EU migration will be given preferential treatment in order to protect the economy.
The statement was in response to building pressure from Japan’s prime minister; Shinzo Abe who warned big firms could quit the United Kingdom unless the UK upholds a flow of European talent to the UK-based financial services companies.
The Tokyo government published a damning 15 page report warning major Japanese banks and car manufacturers could leave the UK if new tariff agreements are not agreed. The Chancellor responded by saying post Brexit measures on free movement should “not strike fear in the heart of Japanese financial institutions” and warned EU policy makers, they would only be harming themselves if they tried to use Brexit to undermine London’s position as Europe’s financial hub.
Furthermore Hammond challenged remarks by former deputy governor of the Bank of England, Charlie Bean, that London was at risk of losing its strangle hold over Euro-denominated clearing services once it leaves the EU. London is home to 37% of the world’s clearing operations, equating to $3trillion daily.
The Chancellor used his first appearance in front of the House of Lord’s EU Financial Affairs committee to respond, stating London has superior economies of scale with multiple currencies being processed at the same time.
“Most of the people that I am talking to, do not believe that you can break off bits of the clearing system. Most of them do not believe that you can persuade clearing to go to any place where it doesn’t naturally want to go. Actually after London, probably, the most likely destination for clearing operations would be New York” Hammond said.
He further added “The structures that we have in London, this very complex ecosystem of banks, funds insurance companies, law firms and business service firms would not and could not be replicated anywhere else”.
“And to break it up or try to damage it in the pursuit of some very narrow and hypothetical national advantage would be a huge mistake for any of our European counterparts to follow. London delivers not only for the UK, but for the European Union as well.”
The chancellor went on to reveal his first autumn statement would focus on increases in infrastructure on November 23rd.