ALEX BRUMMER: London keeps its crown as Europe’s top financial centre

The City of London’s ranking as a top two financial centre, together with Wall Street, has long been a source of aggravation in Continental Europe.

When the UK was part of the EU it was tolerated, if not welcomed. There were various efforts designed to dampen the animal spirits in the Square Mile.

These include the capping of banker bonuses, failed attempts by Deutsche Bourse to merge with the London Stock Exchange (LSE), and Solvency II, which is now being dismantled.

The reality is that long after the Brexit referendum in 2016 and the UK’s formal farewell to Brussels on January 31, 2020, London’s role as Europe’s largest financial centre is remarkably intact.

The UK remains the world’s biggest location for foreign exchange with a 38 per cent market share. In the first half of this year the London Clearing House, owned by the LSE, traded €191.3trillion (£164.7trilllion) of euro area swaps alone. 

Brussels aims to repatriate some interest rate contracts to Continental capitals. But even if this happens, it is estimated that no more than 20 per cent would move to the Eurex in Frankfurt.

All of this provides context to comments by Euronext chief executive Stephane Boujnah who told Bloomberg that London is no longer Europe’s largest financial centre.

He argued it was simply the financial centre for Britain. He noted that while ‘more money changes hands in London than Paris’ each day turnover across all of Euronext’s exchanges is double that of London.

He points to the Dublin listing of Ryanair (the London listing was secondary) as well as Universal Music NV’s Dutch float as quote evidence of City decline.

Losing key listings in London is disappointing. Dealogic data shows that 2022 was a bad year for initial public offerings. Floats were 90 per cent down in New York and 80 per cent down in Europe. 

The LSE was the busiest of platforms with 41 debuts raising £1billion. That is not a big number but it is more than twice the capital raised in Paris, which saw just two new listings.

The narrative that the City has been overtaken by Paris, Amsterdam and other trading centres does not stand up to full scrutiny. As the Euronext boss conceded, in money terms, London is ahead of rivals.

Adjusting for the value of suspended Russian stocks, the drop in the pound this year and other factors, claims for Euronext and Paris look less persuasive.

Moreover, the bigger stock market transactions, conducted by London-based investment banks in Amsterdam, often go through Turquoise. Say it quietly – but that is owned and operated by the LSE.

Digestion relief

After months of uncertainty, a sigh of relief at GlaxoSmithKline, Haleon, Sanofi et al over the federal court ruling on the safety of ulcer drug Zantac.

US Judge Robin Rosenberg’s 300-page demolition of an action brought by 50,000 plaintiffs, claiming Zantac was responsible for causing five types of cancer, could not have been more definitive.

The share prices of GSK and Haleon have been under a cloud since August, when the markets first wised up to the fact that the blockbuster drug might have had harmful side-effects. Morgan Stanley put the potential compensation bill at £37.5billion.

There is a quiet confidence that Rosenberg’s forensic wrecking of the science put forward by claimants should serve the cause of the pharma companies well in still-to-be-heard hearings in Delaware. 

Precedent suggests that Delaware rarely challenges matters already heard by a federal judge.

Of more concern might be the trial scheduled for February 13 in Oakland, California. The litigants there claim their clients are ‘suffering from all types of cancer’ and deserve justice. As BP and others could testify, outcomes from some state courts can be very quirky and costly.

One cannot ignore the perceived health maladies suffered by some Zantac users. But as share price rises show, Judge Rosenberg has given big pharma the upper hand.

Farewell Fenwick

The disappearance of Fenwick from New Bond Street after 130 years denudes the West End of London of yet another landmark department store.

The saving grace is that the cash from the sale gives its other emblematic luxury stores in Kingston, Brent Cross and its base in Newcastle better chances of survival. Jeremy Hunt’s decision to end the VAT tax break for overseas shoppers doesn’t help.