Britain’s decision to break from the European Union five years ago set off alarms that London would lose its pre-eminence as a global financial centre. In the world of emerging markets, it appears to have been quite the opposite.
Far from triggering an ‘exodus of business’ to rival hubs such as Paris and Frankfurt, the Brexit process has coincided with an increase in the buying and selling of currencies and bonds from developing economies through the UK capital. Since Britain voted to leave the EU in June 2016, trading in the Chinese yuan, Indian rupee and Russian ruble has ballooned, according to Bank of England data. And it’s a similar story when it comes to sales and listings of emerging-market debt.
Simon Harvey, a senior currency analyst in London at Monex Europe said:
“After Brexit, there has been some shift to European capitals but it is not as dramatic as people feared in 2016. The rise of Dublin and Frankfurt and the threat from rival hubs New York or Tokyo overtaking London as the world’s premier foreign-exchange hub is not a major concern.”
In the past five years, London maintained its lead for trading in emerging-market currencies closest to its timezone. Its share of volumes in the Chinese yuan, the most-traded developing currency by far, exceeded those for New York by more than four times.
Global banks, asset managers and financial institutions will retain a substantial part of their operations in London. The fact that a larger outflow didn’t happen will provide comfort to a city that accounts for about a quarter of the nation’s economy, and will only reaffirm Boris Johnson’s post-Brexit project for a “Global Britain.”