London’s world-renowned financial district has suffered a setback in status due to Brexit.
Amsterdam has moved ahead of London as the number one share-trading centre in the European market, although it was not immediately clear if this was just a short-term blip or indications of a more longer-lasting trend.
Blame it on Brexit, financial industry experts say.
The Brexit agreement between the UK and the EU failed to resolve key issues surrounding the financial markets with the result being EU-based banks unable to trade via London’s financial district, known as The City or The Square Mile.
The acrimonious split has caused a drop in trading volumes in London with Amsterdam picking up the slack.
In January over US$11 billion shares a day were traded via Amsterdam, more than four times the volume for December.
On the other hand, London experienced a sharp decline in its trading volumes, moving a comparatively much smaller US$10.3 billion for the same period.
Industry experts say although the overall economic hit from the loss of trade volumes will be small, it nevertheless represents a significant loss of status.
Financial services account for around 7 per cent of the UK's GDP earning some almost US105 billion in tax revenue last year.
The EU alone accounts for some 40 per cent of the UK’s international banking and investment's business.
With details of an agreement on financial serves still to be finalised between the UK and the EU, it was feared that London would struggle to regain lost ground.
Amidst concerns that the EU was planning to block the UK from its financial markets, urgent steps were being taken to resolve the outstanding issues.
Both sides are said to be keen to arrive at an agreement by March on what’s called an "equivalence" regime where they would recognise each other's regulations.
However, there’s a prevailing view that an eventual agreement between the two sides might still exclude share dealing.
At the same time, a counter-argument suggests that failure to conclude the “equivalence regulatory deal” could create wider global opportunities for the UK - particularly the London financial centre - targeting markets such as Singapore and Hong Kong.
One of the key obstacles in the Brexit negotiations was a reluctance by the UK to subscribe to EU financial sector regulations - an issue which also holds implications for Cayman and other UK Overseas Territories whose economies are heavily-based on global financial services.
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