London's Future As Financial Centre In Question

The market turmoil that greeted the vote to leave the EU underlined the shock nature of the decision, and traders' fears of what unprecedented uncertainty might mean - not just for the economy but their own livelihoods.

The likes of Deutsche Bank (LSE: 0H7D.L - news) and JP Morgan have made ominous mutterings about relocating jobs elsewhere in Europe. This isn't financiers having a hissy fit; more, potentially, sound business sense.

It comes down to "passporting" - a regime established in the 1990s whereby a bank setting up in one EU state can open branches or offer services in other states without needing authorisation.

Hence many overseas banks set up bases in London, attracted by an favourable tax regime, skilled staff, infrastructure, and a time zone conveniently positioned midway between the US and Far East (Kuala Lumpur: 5029.KL - news) .

Retaining passporting rights is likely to be one of the trickier negotiations we encounter.

Some argue that, given the creative nature of multinationals, banks could open a nominal base in another EU state to circumvent the change, while retaining operations in the UK.

In reality, though, at least some may choose to move offices and staff elsewhere.

With (Other OTC: WWTH - news) the vote for Brexit arguably seen as a vote against the elites, some might have limited sympathy for a few bankers losing their jobs. But the implications for the wider economy are significant.

According to the Bank of England, nearly 170 non-European banks operate in the UK now. In the last 20 years, our trade in financial services has tripled to 3% of GDP. That's more than twice the EU average, and happened despite our decision not to join the euro.

We sell roughly £20bn more of financial services to the EU in a year than they sell to us. By comparison, we ran a deficit in our trade in goods with the EU of more than £20bn in the last 3 months.

Figures from the Office for National Statistics show the services industry accounted for 78.5% of the country's gross domestic product in 2015, of which the financial industry made up 7.6% - accounting for £111bn.

There's a lot at stake. The next time you see one of those photos of a trader with their head in their hands, they may have more than the falling pound on their mind.