The Gherkin would be re-zoned as social housing. The Walkie Talkie would be turned into a massive TK Maxx with a couple of fried chicken shacks at ground level. Canary Wharf would be paved over and turned into a giant trampoline park, while houses in the better parts of Chelsea and Notting Hill would fall in price so much that just about anyone could buy them again. When the UK voted to leave the EU, it was confidently predicted that the City of London would be wiped out, with the loss of tens of thousands of jobs and billions in tax revenues.
And what happened? According a report by the City of London Corporation, due to be released in September, the number of jobs lost might be as low as 5,000, and will probably be no higher than 10,000. Five thousand. It is worth pausing for a moment to consider how minuscule a number that is. An estimated 751,000 people work in the finance industry in London alone, and many more across the country. So less than one per cent of those jobs will disappear. Tops. In any industry you’d expect two or three per cent of jobs to vanish in a normal year, as technologies change, and the fortunes of different companies ebb and flow. Despite all the hysteria, leaving the EU doesn’t seem to have made any difference to the City whatsoever. It is doing just fine and will continue to do so.
And yet, the EU expected the City to be the biggest casualty of Brexit. It has long been jealous of the way London dominated the continent’s financial services industry. It expected an exodus of well-paid bankers to Frankfurt and Paris desperate to stay inside the Single Market. Hardly a day passed without a senior French or German official touring the London banks pitching their cities as the natural base for their operations, helped on by some hysterical coverage from the Financial Times and the BBC. It threw everything it had at undermining the City. And it is now clear that it has failed.
There should never really have been any surprise about that. A few rules set in Brussels don’t actually impact anything very much. Most of them are irrelevant to how businesses actually operate anyway. In so far as they matter, banks and brokers can set up branch offices to cope with them. Like most bureaucracies, the EU is good at imposing minor, irritating costs. It is not so good at genuinely changing anything. What counts in finance is skills, technology, networks, heritage, and people. London has all of those, and most other European cities don’t. The result? The City will carry on much as before.
That, however, poses two problems for the rest of Europe. The first is that it will be dangerously reliant on a financial centre that is not only outside the euro-zone but soon outside the EU as well. Most corporate debt, and indeed government debt (and most euro-zone countries love to borrow money) is traded through London. The rules of that business will gradually drift away from its control. The second and bigger problem for the EU is that it is going to become painfully apparent that membership doesn’t make much difference to an economy one way of another. That is clearly true of finance but will soon be true of most other industries as well. The EU has sold itself as indispensable to the prosperity of the continent. But the UK, with the City leading the way, is about to demonstrate that is not actually the case – and it will be interesting, to say the least, to see how the Brussels machine justifies its existence once that becomes clear.