City of London makes late scramble to limit Brexit disruption – FT

  • Companies and regulators are making last-minute arrangements to avoid disruption when the UK leaves the EU’s single market next month.
  • Segro dual-listed its entire share capital on Euronext Paris to protect its holding structure after the end of the Brexit transition period.
  • European regulators also finalised a late change seeking to avoid chaos in £15tn of derivatives contracts held between UK and EU counterparties.
  • Discussions over mutual access to each side’s financial markets are separate and covered by regulators. Much will hinge on a series of so-called equivalence decisions covering individual countries and financial products.
  • A lack of equivalence decisions would not shut UK banks, investors and trading venues out of the EU market, but it may open up gaps and drive up costs.
  • The EBA, Esma and Eiopa, which oversee Europe’s banking, trading and insurance industries, said they would allow banks and asset managers to transfer their old open derivatives trades held in London to EU subsidiaries without triggering new regulatory demands.
  • The commission has said its equivalence assessments of the UK must be “forward looking” and take into account any British plans to diverge from EU rules. Brussels has said it needs more information despite the UK government providing 2,500 pages of answers to EU questionnaires earlier this year.
  • UK chancellor Rishi Sunak announced some equivalence decisions in November that will, for example, ensure EU-based exchanges, clearing houses and financial benchmarks can continue to be used by UK customers. But the EU made clear it had no plans to immediately reciprocate.

City/Brexit: fishing before finance – FT

  • Trawlers matter more than share traders in the UK’s fitful negotiations with the EU.
  • The failure of the UK to agree full “equivalence” — mutual recognition of local standards — with the EU is forcing City institutions to act. Equivalence applies in clearing, notably in the huge derivatives trade. But banks, brokers and fund managers face a new year cliff edge in a swath of other specialisations.
  • Contingency planning is just a fancy phrase for common sense. As Brexit rolled along, City bosses set up new EU offices that could flex from a brass plate to a full-service operation. It has become clear local regulators will expect meaningful local decision-making, capital and staffing.
  • The City’s network advantages should reassert themselves as lockdowns taper away next year. Even so, less EU-related business would have been lost if the UK had given finance as high a priority as fishing.

No-deal Brexit would cost UK car industry £55bn, says analysis – The Guardian

  • The UK automotive sector risks losing £55bn in manufacturing value within five years in the event of a no-deal Brexit, according to new industry analysis.
  • British car production could drop below 1m cars a year if there is no deal, compared with more than 1.3m in 2019, because tariffs would make large parts of the UK business unviable.
  • Trade negotiations between the UK and EU have still not reached a conclusion. EU ambassadors have been told a deal is close to being finalised, but there is still a risk of talks falling through.
  • Industry executives have warned that a no-deal Brexit would jeopardise the future of UK plants. PSA Group has said it will only build its new Vauxhall Astra in the UK if there is a trade deal, while Nissan has said the business model of its Sunderland plant – the largest car factory in the UK – would be destroyed.

Goldman in Paris Is Another Blow for London – Bloomberg

  • Whatever happens after January’s official Brexit separation date — and whether a U.K. trade deal with the EU is agreed or not — Europe will chip away at London’s dominance. Goldman Sachs Group Inc. is setting up a stock-trading venue in Paris is another reminder.
  • Should there be no agreement to allow the trading of European shares in Britain after Brexit, the Wall Street firm’s clients will still be able to do transactions on the continent. Even if London and Brussels eventually agree to “equivalence” on their finance industry rules, expect Goldman to keep the new venue going. Equivalence can be withdrawn at short notice.
  • Elizabeth Martin, head of Goldman Sachs’s equities execution services, told Bloomberg News that she believes the City will lose most of its trading volumes in EU stocks.
  • An overnight rupture with London in January wouldn’t be in anyone’s interest. The EU hasn’t yet granted equivalence status that would allow stock trading, and myriad other activities, to carry on as usual in the capital. A smooth handoff, say a six-month grace period, would ensure no unpleasant surprises.