While the U.K.'s exit from the European Union will bring opportunities to other financial centers, Brexit does not spell the end of London's position, said Lord Jonathan Hill, former European commissioner, financial stability, financial services and capital markets union.
Speaking in a keynote session at Pensions & Investments' WorldPensionSummit in The Hague, Netherlands, Mr. Hill said in the short term, there are opportunities for European cities — "mainly Frankfurt at the moment it seems — to attract more investment and jobs from business which will need to have a physical presence in the EU after Brexit."
However, he said there are two longer-term questions for financial services and the European economy. "First, what kind of political and legislative climate is likely to develop in the EU without the U.K. as a member; and second, if like me you don't believe that it is possible for the existing capital markets activity centered in the U.K. to switch easily and swiftly to some other European center, how do you avoid the additional financing costs that will come from fragmentation? How, to put it crudely, do you avoid damaging London in order to benefit New York?"
Mr. Hill said one of the "many myths" of the referendum campaign in the U.K. was that Britain had no influence in the EU, and "that our financial services industry was being uniquely held back by European legislation. Contrary to that myth, Britain had a big voice in the EU on financial services legislation."
He said the question is, "with Britain's voice stilled, is another country going to step up to do the heavy lifting on financial services legislation. Who is going to be the champion of capital markets, and of business-friendly, pragmatic and proportionate legislation?"
Mr. Hill said for those financial centers to attract this business on any scale means "other countries are going to have to make sure that there is a supportive, legislative framework. And they're going to have to develop regulatory and supervisory approaches that will look to the future by encouraging innovation in financial services, rather than looking back to the last crisis."
For the U.K., Brexit does not spell the end of London as a financial center, added Mr. Hill. "And particularly not if the U.K. would start to spend a bit more time thinking about how to attract the growth sectors of the future, rather than endlessly arguing about Brexit."