The City of London, the gem in the global financial markets crown, has come in for some generous defence from soldiers in both armies overnight as the Brexit battle ensues.
While British Premier Theresa May is accused of begging EU’s Jean-Claude Juncker for a deal – German press accusations that even Juncker has denied – others are weighing up just how important it is to keep City of London intact.
Among the loyal army, Bank of England’s deputy governor Sir John Cunliffe, with a surname peculiarly like that of the 1980s London trading centre LIFFE, said on Monday he was confident in the Square Mile’s future, adding he cannot see it being replicated in the EU.
Cunliffe did caution that his prediction was not for the long term albeit a lot of critical mass would have to amass first. Expertise and sheer volumes would need to walk to undermine London.
But even those in the opposing camp are now expressing disquiet.
Luxembourg’s finance minister Pierre Gramegna warned the EU against taking a hardline approach towards a Brexit deal that left the City drifting into the Atlantic.
For one thing, brass plate Luxembourg relies heavily on London for its clients’ asset management and stock clearing services.
Gramegna wants London to remain well-connected and not become a satellite for the United States.
But things may get more crowded in tiny Luxembourg where Citigroup and JPMorgan have signalled they will move to when they uproot from Brexit Britain. Goldman Sachs meanwhile has opted for Frankfurt and RBS, still bankrolled by the British taxpayer, may opt for Amsterdam.
Many banks are considering their options based on the worst-case scenario in Brexit talk conclusions. That’s only wise.
But even if the banks feel obliged later to carry out an exodus from London, the reality is likely to be only parts of their operations move. Sure, they want to ensure that any EU financial product passporting privileges they have are not going to be annulled after Brexit.
But you can bet your bottom euro they will also want to ensure they benefit from the critical mass and infrastructure of the London markets.
So it is a reminder of what land-restricted locations like Luxembourg are keen to maintain: a presence in Europe but the volumes in London.
And the very fact that banks are contemplating moving to locations as diverse and sparsely spread out as Amsterdam to Luxembourg to Frankfurt to Zurich sounds like none of those centres will ever emulate London.
Secondly, Europe is naive if it thinks London does not have a cunning plan. But frankly I’m sure they know all about it. The UK has already expressed its desire to offer tax haven status and drive down corporation taxes.
But what if London also slashes fees from asset management to trading to clearing and undercuts Europe?
As a young financial reporter I recall how London LIFFE lost the valuable euro bund future business in 1999 after Frankfurt’s Eurex made a push for it.
Made logical sense yes. But that was not enough. To win over electronic trading Eurex had to slash fees and within months cost-conscious business migrated to it.
London could attempt the same. Mind you, LIFFE is now part of the ICE NYSE after a series of takeovers begun in 2002. In all the acquisition activity everyone was chasing ownership of one corporate gem: LIFFE. That race could soon re-commence.