Government papers leaked to Buzzfeed have today revealed that the UK may be worse off no matter what Brexit deal is reached with the EU.
The papers indicate that under a comprehensive free trade agreement with the EU, the UK economy would be 5% lower over the next fifteen years. A “no-deal” scenario would reduce growth by 8% over this timeframe and continued single market access, or a “soft” brexit, would yield 2% lower growth in the long-term.
In addition, the report suggested that London would take a hit as a financial capital and that nearly every sector in the economy would be negatively impacted.
Yet despite the bleak picture painted in the leaked report today, there are still reasons for fintech firms to feel optimistic about what lies ahead. London’s unique position as a global innovator is not under threat.
Huang Geyang, the Head of Greater China at London & Partners, who has been charged to promote London to Chinese investors today remarked:
“London should still turn heads because it has four of the world’s 50 top-ranked universities, more than any other city…Corporate taxes are lower than other developed countries and should be between 19 per to 17 per cent by 2020. London is fueling growth of the British high-tech economy.”
London & Partners also pointed out that several global tech behemoths pledged their long-term commitment to the capital last year. Amazon, Apple and Google have all announced major investments in London over the past 12 months. Dimension Data, another recent investor in the English capital referenced that the ease of living in London and its place as a global city is what allowed them to relocate all their senior team to a new strategic hub in Westminster.
It’s not only the lifestyle that’s better here than in other European cities, London is an attractive place for investment because we have always encouraged innovation. This has become more prominent over the past ten years. Today in The Times, Matthew Lynn has stated that:
“Over the last decade there is one thing we have become spectacularly good at – setting up new companies. Ever since the crash, Britain has enjoyed an entrepreneurial renaissance, with new companies established at a record rate.”
A recent report by PwC also reinforced London’s unique ability to promote innovation:
“The UK has always encouraged innovation…critical to this has been a forward thinking, open and collaborative regulatory regime.”
In addition, the banking sector has begun to de-escalate early claims about moving thousands of jobs from London. Deutsche Bank, which initially claimed some 4000 jobs would move from London has said that it is likely to be a few hundred now instead.
This week, Reuters reported that whilst Europe is attempting to lure bankers over to Frankfurt or Paris, it’s more of a trickle than a flood (read the article here).
The report leaked by Buzzfeed may cause a level of concern but despite uncertainty in the Brexit debate, all evidence appears to indicate that London will remain a financial hub and a source of innovation and investment.