ALEX BRUMMER: London keeps its crown as Europe’s top financial centre


ALEX BRUMMER: London retains its crown as Europe’s largest financial center (whatever the Brexit doomsayers may say)







The City of London’s position as a top two financial center, along with Wall Street, has long been a source of annoyance in continental Europe.

When the UK was part of the EU it was tolerated if not welcomed. There were several attempts to temper the animal spirits in the Square Mile.

These include the capping of bank bonuses, failed attempts by Deutsche Bourse to merge with the London Stock Exchange (LSE) and Solvency II, which is now being dismantled.

Ahead of its rivals, the UK remains the world's largest foreign exchange location with a market share of 38 percent

Ahead of its rivals, the UK remains the world’s largest foreign exchange location with a market share of 38 percent

The reality is that long after the 2016 Brexit referendum and the UK’s formal farewell to Brussels on January 31, 2020, London’s role as Europe’s largest financial center has remained remarkably intact.

The UK remains the world’s largest foreign exchange location with a market share of 38 percent. In the first half of this year, the LSE-owned London Clearing House alone traded €191.3 trillion (£164.7 trillion) in euro area swaps.

Brussels wants to repatriate a number of interest rate contracts to continental capitals. But even if that happens, it is estimated that no more than 20 percent would move to Frankfurt’s Eurex.

All this gives context to comments by Euronext CEO Stephane Boujnah, who told Bloomberg that London is no longer Europe’s largest financial center.

He argued that it was simply Britain’s financial center. He noted that although ‘more money changes hands in London than in Paris’, the daily turnover on all Euronext exchanges is double that in London.

He points to Ryanair’s Dublin listing (the London listing was secondary) and Universal Music NV’s Dutch float as citation evidence of the city’s decline.

Losing key listings in London is disappointing. Data from Dealogic shows that 2022 was a bad year for IPOs. Floats were 90 percent in New York and 80 percent in Europe.

The LSE was the busiest of the platforms with 41 debuts raising £1 billion. That’s not a huge number, but it’s more than double the capital raised in Paris, which saw just two new listings.

The story that the city has been overtaken by Paris, Amsterdam and other trading centers does not stand up to full scrutiny. As the Euronext boss admitted, London is ahead of rivals in terms of money.

Adjusted for the value of suspended Russian stocks, the fall in the pound this year and other factors, claims for Euronext and Paris appear less convincing.

In addition, the larger stock market transactions, conducted by London-based investment banks in Amsterdam, often go through Turquoise. Put it mildly – but that is owned and operated by the LSE.

Digestive relief

After months of uncertainty, a sigh of relief from GlaxoSmithKline, Haleon, Sanofi et al over the federal court’s ruling on the safety of Zantac, the anti-ulcer drug.

The 300-page breakdown of a lawsuit filed by 50,000 plaintiffs by U.S. Judge Robin Rosenberg alleging Zantac was responsible for causing five cancers couldn’t have been more definitive.

Share prices of GSK and Haleon have been skyrocketing since August, when markets first realized the blockbuster drug could have harmful side effects. Morgan Stanley estimated the potential compensation bill at £37.5 billion.

There is a quiet confidence that Rosenberg’s forensic demise of the science put forth by plaintiffs will serve the drug companies’ case well at hearings yet to be heard in Delaware.

Precedent suggests that Delaware rarely contests cases already heard by a federal judge.

Perhaps more concerning is the trial scheduled for February 13 in Oakland, California. The litigants there claim that their clients “suffer from all types of cancer” and deserve justice. As BP and others have testified, the results of some state courts can be very idiosyncratic and costly.

One cannot ignore the alleged health ailments of some Zantac users. But as the rise in stock prices shows, Judge Rosenberg has given the big pharma the upper hand.

Goodbye Fenwick

Fenwick’s disappearance from New Bond Street after 130 years strips London’s West End of yet another historic department store.

The saving grace is that the money from the sale will give its other emblematic luxury stores in Kingston, Brent Cross and its base in Newcastle better chances of survival. Jeremy Hunt’s decision to end the VAT tax credit for foreign customers is not helping.