GT Voice: UK faces battle to keep London at heart of global finance
Published: Jan 19, 2021 07:08 PM

People walk past the Houses of Parliament in London, Britain, on Jan. 1, 2021. Photo:Xinhua

Pressure is mounting on the UK financial service providers as the EU seeks to strengthen its financial standing and promote the euro's role in the world which has long been eclipsed by the predominance of the US dollar.

Should the EU want the euro to compete with the greenback, it needs a financial system to match it, Markus Ferber, a senior member of the European Parliament, said on Monday, noting that, "We need a clear step-by-step master plan that helps key financial sector businesses move from the UK to the EU."

Given these developments, EU is set to unveil a plan to strengthen the euro's international role, the remarks by the senior EU lawmaker's reflect a rising call within the EU for reduced reliance on Europe's biggest financial center London post-Brexit. 

While the UK's financial sector is highly competitive and it is up to individual companies to decide whether to move businesses to EU countries, it is undeniable that London's status as a global financial hub is under unprecedented siege, due to the post-Brexit uncertainty and an intensifying market turbulence that is set to come.

Although the UK and the EU reached a last-minute Brexit trade deal, the British economy still faces significant difficulties and rising uncertainty. At a time when most parts of the country remain under lockdown due to the surging COVID-19 cases, the UK is in a quagmire when it needs urgently to stabilize a rapidly faltering economy while expanding its own trading network post-Brexit.

And its financial sector could fare worse. The absence of an agreement on financial services in the Brexit deal, which only focused on the trade of physical goods crossing the borders, may pose far-reaching problems for the UK's financial stability, especially when the EU has a desire to strengthen its own financial autonomy and power.

The EU's need to reinforce the strength of its own financial sector is understandable. The US Federal Reserve's unrestrained quantitative easing and stimulus pumping are racking up pressure on global markets with a flooding of the dollars. 

To counter the spillover effect, it is essential for the EU to curb its dependence on the dollar by promoting its own currency's international role. Achieving this goal will require the strengthening of their financial system, which will inevitably seek to draw on more assets and talent from the UK.

For the time being, London remains the largest financial capital in Europe with the highly concentrated financial institutions trading foreign exchanges, financial derivatives, equities and securities, and it remains to be seen how EU's new plan for its financial sector will reshape UK's financial sector competency. 

From the perspective of the City of London, the established financial center is facing the increasing urgency to consolidate its status in the face of imminent fiercer competition.

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