Early Brexit talks may stop flight of UK financial firms

Andy jalil – andyjalil@aol.com – It won’t be long after the general election on June 8 that the Prime Minister Theresa May will be turning her thoughts to Brexit negotiations.
With some financial companies already in the process of planning their operations out of the UK after Brexit, the government will have to move fast in the talks to give clarity to firms to make decisions on relocating depending on the negotiations.
The process of leaving the European Union is likely to be a difficult one for the financial services industry.
London is a global hub, bolstered by its pan-European reach.
But unless the UK government can negotiate a better position, the disappearance of financial services passport will mean companies in many sectors will not be able to conduct business within the EU as at present.
With some businesses already planning for this contingency, we find that jobs are beginning to move out of the UK.
This is partly because there is some resignation among business leaders that even if a deal with the EU is struck, the process of leaving the Union will be so complex, and the position of Britain’s financial services industry will be so central, that such a deal will only become clear very late in the negotiation process.
This timeline might be too uncertain, and too late for firms to rely upon, which makes it essential for this issue to be discussed as early as possible in the negotiations.
On the other hand, Britain is wooing more foreign companies with the London Stock Exchange (LSE) pointing out the benefits of listing in the capital.
Since the EU referendum last June, it has been a tumultuous period for many British businesses.
But the London Stock Exchange Group has probably had a rockier ride than most.
In addition to the uncertainty around Brexit that all firms have had to deal with, the LSE has also endured businesses being frightened off stock exchange flotations, the breakdown of its mega-merger with Deutsche Boerse and the politicisation of one of the largest part of its business, with the European Union politicians seemingly intent on dismantling London’s dominance over the euro clearing market.
Despite its troubles, the LSE has had a few things to shout about in recent months.
And, perhaps surprisingly after last year’s Brexit vote, they have centred around international businesses showing an interest in London and the stock exchange. This is set to continue.
The LSE’s most high-profile win this year has probably come from billionaire US hedge fund manager Bill Ackman, who listed Pershing Square Holdings in London earlier this month.
Bank of Cyprus also listed on the LSE earlier this year, while Ireland’s government is planning to float Allied Irish Banks in London, as well as Dublin, in the coming months.
Elsewhere, Kuwait Energy has this month announced plans for a London float, while Dubai’s ADES International, an oil services company, entered the market this month and the National Highways Authority of India became the latest Indian company to list masala bonds on the LSE just over a fortnight ago.
“We’ve always been a very global market,” said Nikhil Rathi, chief executive of the London Stock Exchange PLC, the LSE group’s UK business, who is in charge of international development for the company as a whole.
Rathi added, “The reason people come to London is the rule of law, regulatory integrity, timezone, depth of investor base, liquidity and fairness of the legal system. Nothing that’s happened in the last year has changed that, or will change this fundamentally.
This is a tradition in London that goes back hundreds of years.”
These are no doubt some of the arguments the LSE and its executives are using in a bid to lure Saudi Aramco to list part of its business in London next year.
The LSE is thought to be in competition with New York, Tokyo, Toronto, Singapore and Hong Kong for what is expected to be the biggest float in history.
Asked about progress on Saudi Aramco, Rathi said, “You’re not going to draw me on that one, I’m afraid.
That’s going to be a no comment.” The LSE has not publicly acknowledged it is chasing Aramco.
But it became hard to deny when group chief executive Xavier Rolet joined the Prime Minister on a trip to Saudi Arabia early last month.