Brexit post-mortem for the City: London’s ‘Golden Age’ is over, warns NatWest chair Howard Davies

The City of London’s ‘Golden Age’ as Europe’s financial capital is over, although the capital will remain a global financial centre, according to NatWest bank chairman Howard Davies.

“Almost five years after the Brexit referendum, and five months after Britain’s exit from the European Union, the future of London as a global financial centre seems secure,” the City heavyweight wrote in a column for website Project Syndicate today.

“But although the City will remain Europe’s largest financial marketplace, its Golden Age as Europe’s financial capital is over,” Davies continued.

Read more: Brexit transfers: Barclays, Goldman Sachs and Morgan Stanley move senior City dealmakers to the EU

The City has been largely cut off from the EU since 31 December, when the UK officially left the bloc.

Brussels can grant direct market access for foreign financial services firms if it deems their home market rules are similar to the EU’s own standards, a designation known as equivalence.

It looks unlikely a deal for the City will be struck with the EU anytime soon.

‘Dialog of the deaf’

The debate about the future of the City so far has remained a “dialog of the deaf” as backers of Brexit say the hit would be minimal, while opponents of leaving the EU forecast “gloom and doom,” said Davies, also a former Deputy Governor of the Bank of England and chairman of the UK Financial Services Authority.

Covid-19 has further confused the picture, making it harder for staff to relocate from London to the EU, he added.

Trading in euro shares and swaps shifted from London to the continent, but it will take time for any putative rival in the EU to develop a plausible matching offer, Davies said.

Read more: Brexit hit: City of London suffers £2.3 trillion derivatives loss in a single month

Bankers want Britain to focus on making the City more attractive for global investors and Brussels is scrutinising Britain to see how far it will go in diverging from EU rules.

David Frost, the UK minister in charge with ties with the EU, said earlier this week that it was important for Britain to use its freedom from the bloc to de-regulate in the most productive way possible.

“We are looking at financial services regulations and seeing what we can do now we are able to move on from EU arrangements in financial services,” Frost said.

He is setting up a new unit to start a “journey that will bring huge benefits.”

Read more: UK government to set up new unit to exploit ‘Brexit opportunities’