Political pressure over LSE merger mounts

Political pressure over the London Stock Exchange’s £21bn merger with German rival Deutsche Boerse is mounting ahead of a parliamentary debate on the controversial tie-up, amid concerns a major City institution will become “locked in the EU” following Brexit.

Sir Bill Cash, the veteran eurosceptic Conservative MP, has secured a debate which will lead to fierce scrutiny of the deal and some MPs are expected to urge the Government to put a stop to the merger.

It comes as Anne Marie Morris, the Tory MP for Newton Abbot, last week wrote to prime minister Theresa May calling on ministers to use their powers under the 1946 Bank of England Act to force the central bank to delay the LSE’s merger with its Frankfurt-based rival until after Britain leaves the European Union.

“The London Stock Exchange locked in the EU does not bear thinking about,” Mr Morris told the prime minister.

“It has been stated publicly that the headquarters will remain in London, with some operational capability in Frankfurt, but longer term, I do not buy it.

“It has been said that the European Commission must continue to have oversight of the London Stock Exchange. So we leave the EU and the single market only to have our stock exchange regulated in Frankfurt?”

The merger will create a European giant whose holding company will be in London but which will be majority owned by the German exchange’s shareholders.

It was agreed before last June’s EU referendum, which has complicated the tie-up, raised concerns about the City’s status as financial powerhouse once the UK leaves Europe, and sparked fears a disorderly Brexit will cause chaos in the markets.

“We have a responsibility to protect the UK’s financial centre,” Ms Morris wrote. “This is not a time to risk uncertainty in our financial markets”.

Meanwhile, the decision to house the headquarters of the business in the City has also caused consternation in Germany, even though Deutsche Bourse chief Carsten Kengeter has said the deal will create 300 jobs in Frankfurt.

In a further twist, German authorities are investigating allegations the Deutsche Boerse boss engaged in insider dealing by purchasing shares in the German company before the deal was public, claims which Mr Kengeter has insisted are “unfounded”.

European competition authorities are due to rule on the tie-up by April 3.