The emerging geography of European financial centres: Fragmentation in the European Union and concentration in the UK?

Abstract

The United Kingdom’s (UK) withdrawal from the European Union (EU) will reshape the geography of European finance. From January 2021, the UK will no longer be able to sell financial services cross-border into the EU’s Single Market as it has done as a Member State. Through what are called passporting rights, these financial services exports from London to the EU have been central to London’s competitiveness as an international financial centre and the wider importance of financial services in the UK’s political economy. They have also provided a range of financial services to businesses and individuals in Europe. In this commentary, we examine the implications of Brexit for the financial services sector and for conceptual understandings of finance in economic geography and cognate social sciences. We argue that at the European scale, Brexit is giving rise to growing fragmentation of financial services to a range of European financial centres. Meanwhile, within the UK, finance is likely to become more concentrated in London as renewed processes of spatial concentration that have characterised previous economic shocks develop. Our analysis shows that that in order to understand these seemingly diverging geographies it is necessary to understand financial services as both economic and political practices.

Hierarchical tendencies, functional specializations, and (in)stability across European banking centers

“…Van Meeteren and Bassens (2016) discussed the role of London's investment banks and related knowledge-intensive business services (KIBS) firms in the issuance of Eurobonds, while Beaverstock et al (2013) documented how private bankers based in London service the super-rich. Building on these insights, scholars discussed post-Brexit dynamics and scenarios for London's banking and financial center thereby addressing aspects of financial specialization and decreasing critical mass of financial functions (Dörry and Dymski, 2021;Heneghan and Hall, 2021;Lavery et al, 2018). However, there has been much less research on such specialized roles of European cities (for Luxembourg, see Dörry, 2016b;Majerus and Zenner, 2020;Walther et al, 2011; for Polish financial centers, see (Blažek et al, 2020), crossborder investment banking fees between 2000 and 2014 (Wójcik et al, 2018), and the 2019 GFCI banking subindex (Z/Yen, 2020).…”

Locating state capitalism: Financial centres and the internationalisation of Chinese banks in London

“…The Johnson administration was much less focused on development economic policy partnerships with China, instead focusing on what it terms an 'Indo-Pacific tilt' (Cabinet Office, 2021). Moreover, the position of London as a gateway to Europe for financial services is also uncertain as financial services firms in the City have lost their automatic market access to export financial services into the EU's single market (Heneghan and Hall, 2021). That being said, it seems clear that the UK government is wary of abandoning its links with Chinese finance entirely.…”

The global division of labour as enduring archipelago: thinking through the spatiality of ‘globalisation in reverse’

“…Following the renewed salience of the EU-UK border, firms have started to re-evaluate the division of labour between UK-based subsidiaries and the European mainland (Fuller, 2021). The financial sector has relocated activities to the EU in order to be able to continue their operations (Heneghan and Hall, 2021), as have several British universities (Kleibert, 2020). Global value chains, while heavily affected by the new regulations, do not cease to exist but morph into new forms and in-and exclude different territories.…”