Economy & Politics

“Brexit will change the role of the market”

Signed on Christmas Eve, the agreement on the departure of the United Kingdom from the European Union on January 1 will inevitably impact the Grand Duchy. Particularly in terms of financial services, the balances in place with the City are likely to change.

Jean-Michel HENNEBERT

Jean-Michel HENNEBERT

Signed on Christmas Eve, the agreement on the departure of the United Kingdom from the European Union on January 1 will inevitably impact the Grand Duchy. Particularly in terms of financial services, the balances in place with the City are likely to change.

More than four years after the referendum of June 23, 2016, Brussels and London have ended up sealing their amicable divorce. An agreement signed on December 24th dedicated to putting in place “the solid foundations of a new beginning with a long-time friend”, in the words of Ursula von der Leyen, President of the European Commission. If the text of nearly 2,000 pages guarantees the free movement of goods and services, it hardly mentions financial services.


Britain's Prime Minister Boris Johnson gestures as he holds a remote press conference to update the nation on the post-Brexit trade agreement, inside 10 Downing Street in central London on December 24, 2020. - Britain said on Thursday, December 24, 2020 an agreement had been secured on the country's future relationship with the European Union, after last-gasp talks just days before a cliff-edge deadline. (Photo by Paul GROVER / POOL / AFP)

After ten months of exhausting negotiations, the European Union and the United Kingdom announced on Thursday an agreement on their future trade relationship. What to avoid in extremis a devastating “no deal”.


A central theme for the United Kingdom, given the weight of the City in its economy. By Boris Johnson’s own admission, the agreement reached with Brussels “may not go as far as we would like” in terms of financial services, the British Prime Minister estimating Sunday in the columns of the Sunday Telegraph that the text still offered opportunities for certain sectors, such as “access for lawyers” and “a digital bargain”.

For Nicolas Mackel, CEO of Luxembourg for finance, this voluntary absence appears as “a sign that the British clearly did not wish to remain aligned with European requirements” and therefore that they preferred “an ideological victory to an economic result” . Asked about the future positioning of the City, the former diplomat converted in the promotion of the Place internationally believes that “the room for maneuver is narrow”, especially with regard to the geographic area covered.

“Singapore supports Southeast Asia, New York bankers will not easily accept British competition in America and I have doubts about the coverage of India or China,” said Nicolas Mackel who imagines “a possible orientation towards the countries of the Commonwealth”. An option, however, considered less favorable than the situation in force until then. For the Place, this choice of London will result in an essential adaptation, the two financial centers being closely linked. A phenomenon also valid for Dublin, but also Frankfurt and Paris to a lesser extent.

“Brexit will change the role of the market”, assures the CEO of Luxembourg for finance, who mentions “gains in the value chain and the arrival of new activities”. Direct reference to the establishment of European private banking hubs of global players such as JP Morgan or Goldman Sachs or the development of the pan-European non-life insurance branch. In the end, the changes to come in the City should lead to “a multipolar organization”, believes Nicolas Mackel who would see Frankfurt and Paris see their role strengthened in the investment bank. Dublin and Luxembourg would grow when it comes to asset management and payment.


Wirtschaft, Finanzplatz Boulevard Royal

With Brexit, finance will have to adapt to the loss of the European passport for the British. Some companies have transferred part of their staff to the continent, in particular to Luxembourg, Paris and Frankfurt. Even if the movement remains contained.


True to his rhetoric, Boris Johnson believes the UK will make the most of its new regulatory freedom to develop other financial sectors. “We cannot suddenly decide that we are free and then not decide how to exercise it,” he said in the British daily. “This government has a very clear agenda to unite, to level up and to spread opportunities across the country.” However, no precise indication of the favorite sectors of the Place has yet been given.


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