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04.04.19 13 OPINION Ioannis Glinavos Ioannis Glinavos is a Senior Lecturer in Law at the University of Westminster T he City of London has not been as vocal as other industry sectors during the Brexit negotiations, but it is perceived to be dissatis ed. e UK's future relationship with the EU re- mains unclear – and if there's one thing most businesses do not like it's uncertain- ty. is is why the City broadly approves of eresa May's withdrawal agreement. At the very least, it stops Britain crashing out of the EU without a deal on March 29. But, with UK politicians not signing off on this agreement, uncertainty per- sists. And, as Brexit's 11th hour creeps closer, we are able to see just how diff er- ent fi nancial fi rms are dealing with the UK's impending departure from the EU. Arguments as to the eff ects of Brexit on the City range from the catastrophic to the negligible. Reams of data and sta- tistics have been produced to illustrate these extreme positions and multiple standpoints in between. e eff ect has – predictably – been confusion. Is the City really threatened by Brexit or not? Perhaps unsurprisingly, attitudes vary from fi rm to fi rm and the answer can be found by untangling the diff erent aspects of City business. Firms dealing with man- aging the investments of wealthy interna- tional clients and funds are less aff ected by a regulatory rupture between the UK and the EU. Yes, there may be some costs involved in moving funds around to meet regulatory requirements as they evolve, but there are also opportunities. Regulatory and tax arbitrage – where fi rms capitalise on legal loopholes and inconsistent requirements in diff erent countries – is how much of the City makes its money. So a new subdivision of systems and requirements within Europe would open up opportunities for savings and new products. e sig- nifi cant amounts of money involved in this aspect of the City's business ensure that a great deal of the current fi nancial structure will remain in place, no mat- ter what shape Brexit eventually takes. Uneven movement abroad Other aspects of the City's business are more vulnerable. Losing the "pass- porting" rights that allow banks to ply their services across the EU means that those parts of the City engaged in insurance, commercial and retail banking will no longer be able to ser- vice their European clients. As much was admitted in the government's no- deal preparation notices. And even if a Brexit deal is signed off before March 29, the loss will occur after the end of the transition period. Subsequently, for the part of the City's banking and insurance sectors that deal with what we call the real economy (standard retail clients and businesses) their business model is up in the air. e only safe solution is to relocate to an EU member state or wind down contracts they will not be able to service in the fu- ture. is explains the uneven movement of City fi rms in response to Brexit. Some move funds and some of their people by establishing or augmenting a base in Europe. For example, Barclay's bank re- cently obtained court approval to move a massive €190 billion fund to Ireland. But this movement isn't just in one di- rection – those fi rms that used to serve British clients from an EU location are now relocating to London. Citibank, for example, is setting up a new Brit- ish bank that will be headquartered in London to ensure it can service its retail clients in the UK after Brexit. Previous- ly, this business was covered by its Cit- ibank Europe headquarters in Dublin. Of course, the money involved refl ects the relative strength and volume of the client base. is is why the movement away from the City makes headlines, while the opposite is primarily of inter- est to clients aff ected. For other fi rms, changes brought about by Brexit are so fundamental that they no longer need to maintain a UK presence. ose will move their regu- lated operations or relocate the entirety of their funds, with Frankfurt, Paris and Dublin being the main benefi ciaries in the fi eld of fi nancial services. A less-reported consequence of all this movement is that City fi rms might also be examining their legal options in terms of suing the British government for the losses incurred by relocations, or loss of market access. So far only a few have the jurisdiction to sue – investors from countries that have signed some form of treaty with the UK that includes investor-state dispute settlement claus- es. ese will be primarily fi rms from outside Europe that had settled in the City in order to serve European clients, which may argue that the UK govern- ment's handling of Brexit violated their legitimate expectations of moving to (and investing) in UK offi ces. But, de- pending on the extent of losses, and the fi nal form of Brexit, lawyers are likely to be busy investigating. Will there still be a City of London in April? e answer is yes. But it will be diff erent, no matter which shape Brex- it eventually takes. In markets, actions speak louder than words, and booming sales of Brexit survival packs are cer- tainly not a good sign. Brexit is forcing City firms to make some tough decisions Barclays' London headquarters

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