LONDON If Britain votes to leave the European Union, London's dominant position as the pre-eminent global financial center in its time zone would be placed under threat and other EU centers would seek to rip away business, British minister Jo Johnson said.
London dominates the $5.3-trillion-a-day global foreign exchange market and is by far the most important financial center in the European Union, vying with New York for the title of the world's financial capital.
Some financiers say a British exit would sap London's wealth, hammer sterling, undermine the world's fifth-largest economy and prompt some traders to move their business to other centers such as New York and Singapore.
Johnson, whose older brother Boris is the most prominent member of the "Out" campaign, said a vote to leave could hurt sterling, affect interest rates and sap the dynamism that has made London the dominant EU center for financial services.
"There is a real possibility that London, having established itself as the pre-eminent European financial center, decides to let Paris and Frankfurt back into the game," Jo Johnson said at a discussion hosted by Thomson Reuters and Clifford Chance at Canary Wharf in London.
"We have positioned ourselves now in a position where it is between London and New York, and potential future centers in Asia," Johnson said. "We would suddenly be putting all that at risk and preoccupying ourselves with a fight for pre-eminence again within Europe."
Since British exchange controls were scrapped in 1979, London has thrived as a center for everything from foreign exchange and bonds to derivatives and fund management, making it the largest net exporter of financial services in the world.
London accounts for 41 percent of global foreign exchange turnover, more than double the nearest competitor, New York, according to the Bank for International Settlements.
London's closest European competitors are Switzerland and Paris, which each take about 3 percent of global foreign exchange turnover.
"A more glowing future exists for Britain outside the European Union as it develops into a truly even more global financial hub," said Craig Mackinlay, a Conservative lawmaker who is campaigning for a Brexit and spoke against Johnson.
When asked about the warnings from global banks such as Goldman Sachs and JP Morgan, he said: "They were probably the same people who said the end of the world was nigh and we would all be leaving if we didn't adopt the euro. They were wrong then and they are wrong now."
Bank of England Governor Mark Carney has cautioned that a vote to leave the EU could hit the country's $2.9 trillion economy, prompt some banks to move away from London's global financial powerhouse and even push up mortgage interest rates.
"I think on sterling I would stick with what Mark Carney said the other day," said Johnson, adding that a sterling depreciation "would import inflation and lead to a path of higher interest rates".
Johnson, who serves as universities minister, said that after a vote to leave, Britain would have to accept freedom of movement if it wanted access for its companies to the single market of 500 million consumers.
"The pattern shows that whenever countries try to construct access to the single market ... it has required freedom of movement and massive contributions to the EU budget, and no role in any decision making processes that frame the rules," Johnson said.
The fate of British trade after a possible vote for an exit in the June 23 referendum has taken center stage since U.S. President Barack Obama warned Britain would be "in the back of the queue" for a trade deal with the United States.
(Editing by Guy Faulconbridge)
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First Published On : Apr 26, 2016 01:30 IST