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London to defy Brexit fears with growth set to outpace European rivals

Max Burman
The City of London is at risk of major financial firms leaving the capital due to Brexit concerns (REUTERS/John Sibley)

London’s financial sector will continue to outperform its biggest rivals in Europe, despite growing fears about the city’s fortunes post-Brexit.

The capital’s GDP is forecast to grow at 2.3 per cent each year from now until 2021, ahead of Paris at 1.6 per cent and Frankfurt at 1.5 per cent.

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The new forecast comes from an Oxford Economics report published on Monday.

Paris and Frankfurt are seen as the main threats to London’s post-Brexit supremacy as a financial hub, with both cities hoping to lure jobs as Britain prepares to leave the European Union.

Global banks have said they could move thousands of jobs out of Britain as they prepare for the country’s planned EU exit.

MORE: Dublin and Frankfurt are the main beneficiaries of Brexit so far

Over 20 financial service firms have already committed to expanding their operations in the two cities, according to City A.M. The likes of Citigroup and Morgan Stanley announced their plans to expand in the German financial capital in just the last few weeks, with Lloyds Bank reportedly planning to move its European hub to Berlin.

Frankfurt has become a popular choice for financial institutions looking to relocate post-Brexit (Frank Rumpenhorst/dpa via AP)

Four of Japan’s largest banks have also revealed plans for a new EU base in Frankfurt. The country’s biggest bank, MUFG, is eyeing Amsterdam as its base for post-Brexit European operations.

Frankfurt is said to be hoping for up to 10,000 new jobs in the long-term, while Paris Europlace, the body responsible for promoting the city’s financial services, is hoping for double that number.

MORE: Brexit will hit southern regions hardest while ‘vote leave’ areas to be least affected

Dublin is expected to be another of Brexit’s big winners, meanwhile, with the Irish capital forecast to grow at a faster pace than London over the next five years. The study estimates Dublin will grow at 2.7 per cent after winning commitments from 15 firms.

Firms require a subsidiary in an EU country to offer their products across the bloc, which could prompt some to move jobs out of Britain if it doesn’t retain access to Europe’s single market.

As internal disputes rage within the government and Labour party over the virtues of the single market, a recent report by the Centre for London warned that a “catastrophic” hard Brexit could cost London up to 70,000 jobs.

Chancellor Philip Hammond is pushing for a softer Brexit (AFP Photo/Daniel LEAL-OLIVAS)

The thinktank called for a ‘city visa’ to protect the flow of European talent to the financial sector amid future restrictions on immigration, a plan The Treasury is now reportedly backing.

MORE: Wall Street giant Citigroup latest name to move key operation out of London after Brexit

London officials have repeatedly expressed their concerns over what Brexit could mean for the capital. In a leaked memo last month, former Home Office minister Jeremy Browne — now the City of London’s Brexit envoy — accused France of plotting to use Brexit to weaken London.

“They are crystal clear about their underlying objective”, he wrote. “The weakening of Britain, the ongoing degradation of the City of London.”

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After a Reuters report that EU officials are considering ending so-called ‘passporting’ from the UK, a move that could severely threaten the city’s financial services supremacy, senior London officials stressed the need to not let politics overshadow the business argument for remaining in London.

“The EU wants to scalp the City and lose the dependency – and we should not underestimate their determination to achieve this”,  Anthony Belchambers, chairman of the advisory council of the Legatum Financial Services Forum, told City A.M.