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London 'to remain key financial centre' as 1,500 EU firms set up in the City

A woman looks out over the city of London over the River Thames, from Greenwich Park in London, Friday Jan. 22, 2021.  Temperatures could drop as low as minus 10C in the coming days, according to predictions as Storm Christoph gives way to colder winter weather this weekend.(Stefan Rousseau/PA via AP)
A woman looks out over the city of London over the River Thames, from Greenwich Park in London, Friday Jan. 22, 2021. Photo: Stefan Rousseau/PA via AP

Almost 1,500 European firms applied to be regulated in the UK ahead of Brexit.

A Freedom of Information request filed by financial regulation consultancy Bovill found 1,476 firms applied for authorisation from the Financial Conduct Authority under its temporary permissions regime. Around 1,000 were setting up operations in the UK for the first time, having previously relied on passporting to serve UK clients from elsewhere in Europe.

“The numbers from this FOI suggest that London is set to remain a key financial centre and that many European firms foresee the benefit of retaining a close working relationship," said Mike Johnson, a managing consultant at Bovill.

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Some 230 businesses were Irish, with the next highest number coming from France, then Germany. More than 100 businesses applied from Cyprus, Luxembourg and the Netherlands.

"The findings also indicate the importance of reaching a decision on financial services equivalence between the EU and UK," Johnsons said.

UK-based financial service businesses lost access to the EU single market on 1 January as Brexit took effect. Companies must now set up satellite offices in the EU if they want to serve clients there, adding to the cost and complexity of operations.

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The EU could grant so-called equivalence rulings, which certify that UK rules are on a par with European regulation and would allow UK-based companies to offer services to clients based in the bloc. The EU has said it is in no rush to make an assessment on this issue and is waiting for more clarity from the UK on how it intends to adapt regulation now that it has power over its own rules.

The lack of access has sparked fears about London's future as a global financial hub. Share and derivative trade worth billions had shifted away from London towards places like Amsterdam and New York since the turn of the year. London's reputation has also declined in the eyes of decision makers.

READ MORE: Brexit leaves UK finance in limbo as City fights for EU access

"The numbers from the UK regulator suggest that financial services firms across Europe recognise London as a global financial centre and want to continue to conduct business there," Johnson said. "Regulatory equivalence decisions would therefore benefit businesses on both sides.”

Last week Barclays chief executive Jes Staley said fears about the future of the City of London were overblown.

"I’m still very constructive on the City," Staley said. "I think London will be fine."

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