Uncertainty and speculation around Brexit have metastasized following the results of the June 8 UK general election which, to say the least, have thrown the country’s Brexit negotiating strategy into yet further confusion. When speaking to our clients in over 100 countries around the world, uncertainty around the UK’s future relations with the EU is a pervasive topic. Brexit presents opportunities for countries like Luxembourg, and for many of the global businesses based in the Duchy, but partnership with London post-Brexit will continue to be important for both in the future. No matter if we talk about soft or hard Brexit, the immediate uncertainty is undermining the confidence regarding the UK’s economic and commercial relationship with the rest of Europe, and so threatens, by natural extension, to further undermine the confidence of financial institutions and investors.
At Clearstream and Deutsche Börse Group we do not think in terms like hard or soft Brexit – rather we believe that there could be several different possible outcomes of the negotiations on the future arrangements for EU-UK trade in financial services. It seems strange that commentators seem to wish to portray Brexit as some kind of binary choice, because it is not. It is a complex, multi-faceted arrangement that will take some time to be resolved.
Like probably everyone with a European mind set, we at Clearstream regret the decision of UK voters to leave the EU, but a choice has been made, and now we need to face the economic, financial and commercial implications of this new reality. We see our role, as does our parent company Deutsche Börse, to continue to deliver stable, secure and reliable financial sector infrastructure services, through the next two years and beyond. We have a dedicated team working on how we will help clients deal with the different potential outcomes of the negotiations. And this is because the uncertainty is likely to have significant implications for Luxembourg and other EU financial centres.
We also firmly believe that London will remain a global financial centre and an important partner of Luxembourg – and what is true for Luxembourg will naturally be true for Clearstream as well. As a global market infrastructure provider, with trillions in cross border assets under our care, we will need to maintain and are committed to maintain a significant and active commercial presence in London, where we have a thriving and important client base.
That aside, we feel that there is no doubt that Luxembourg will be well positioned to pick up business as a result of Brexit, due to the aforementioned increasingly pervasive sense of uncertainty and the need of financial institutions to ensure they can continue to do business in mainland Europe post the UK’s departure. We see the first signs of this already.
The EU’s financial regulators, such as the European Securities and Markets Authority (ESMA), and the European Central Bank (ECB), for instance, have made clear they will not allow ‘letter-boxing’ of financial institutions based in London. Some firms are making announcements about their future location strategy.
As a result, many institutions are likely to decide that they have to make a significant commitment of staff and operations to the EU. Just how much remains to be seen but, by the end of 2017, many London-based global financial institutions will need to start the actual execution of their Brexit strategies. Like Luxembourg itself, Clearstream seeks to maintain strong links with London post-Brexit. This said, we firmly believe that there will also be interesting opportunities for global businesses like ours, which are headquartered in the heart of the EU.
It is up to our London-based customers to make their own decisions on the best locations for their businesses post-Brexit, bearing in mind that the regulatory environment could be very different. As a reliable market structure partner, we stand ready to provide them with stability and solutions during these uncertain times.