The City of London has lost its position as the largest financial services pole in the European Union since Britain left the bloc 10 years ago and no longer sells its financial services within the Union with the previous regulatory ease, especially after it lost the “financial passport” system that allowed companies licensed in the British capital to serve the Union’s clients, according to what the European Central Bank stated.
In its latest report on global financial competitiveness, the City of London Corporation says that the output of financial and related professional services in the United Kingdom reached 307 billion pounds ($405 billion) in 2024, or about 12% of British economic output, and it paid 110 billion pounds ($145 billion) in taxes in 2023, and employs more than 2.4 million people.
But the institution indicated that the sector emerged from Brexit more forced to diversify its markets outside Europe, and more dependent on a global bet extending to the United States, Asia, and the Middle East.
Economic blow
Jonathan Portes, professor of economics and public policy at King’s College London, said in a comment to Al Jazeera Net that “the general economic impact of Brexit was large and negative, as economists widely expected,” suggesting that the British GDP would be “about 3% to 5% lower than it would have been without Brexit.”
The British Office for Budget Responsibility had expected – after Brexit and the implementation of the Trade and Cooperation Agreement starting in 2021 – that Britain’s long-term productivity would decline by 4% compared to the scenario of remaining in the European Union. The Greater London Economics Unit also concluded that the London economy in 2019 was about 6.2% lower, or 32 billion pounds sterling ($42 billion at current prices), than it would have been if Britain had voted to remain.
However, Portes distinguishes between the impact of Brexit on the British economy as a whole and its impact on the financial district in particular, saying that leaving the European Union “weakened the city of London,” but he adds that the damage “was not as large as many feared,” as some activity and jobs moved to Paris, Frankfurt, and Dublin, but London “is still by far the largest financial center in Europe,” and the overall impact on jobs was “marginal,” because financial services companies are accustomed to dealing with cross-border regulation, and were able to adapt without major disruption.
British economist and research fellow at the European Institute of the London School of Economics and Political Science, Ian Begg, summarizes the issue by saying to Al Jazeera Net that “fears of major damage to the city of London have proven to be greatly exaggerated.”
What did London lose?
The ECB says Brexit has made it a “third country” from the bloc’s perspective, and that UK banks can no longer serve bloc customers via a financial passport, i.e. the right to provide services across borders or branches on preferential terms from one member state.
In the political custom of the European Union, countries are classified into three categories: The first state: is the member state itself (within the union), the second state: is the other member states of the union (internal partners), and the third state is any state located outside the geographical and political scope of the union and its institutions.
According to the European Affairs Committee of the House of Lords, the absence of financial trade provisions in the Trade and Cooperation Agreement, along with the loss of financial passability rules, has prompted companies in the London insurance market to restructure and establish subsidiaries within the union in order to continue serving European clients.
From the beginning, the European Central Bank stressed the policy of “no empty shells”, that is, not allowing formal European entities without real risk management and strategic capabilities within the Union.
Asset migration
Data from professional services company Ernst & Young show that 44% of the largest 222 financial services companies with significant operations in the United Kingdom have announced, since the separation referendum, plans to transfer some operations or employees to the European Union. It says that 24 companies have announced the transfer of British assets of just over 1.3 trillion pounds ($1.7 trillion) to the Union, while the number of announced employee transfers stabilized at just over 7,000 by March 2022.
According to the services company itself, the transfer of assets accelerated before the end of the transitional phase on December 31, 2020, after it became clear that the agreement between Britain and the European Union would not grant the British financial services sector trade concessions equivalent to what it enjoyed within the single market. Thus, the financial weight transferred was greater than the number of employees transferred.
Where did the jobs go?
The worst expectations that circulated after the referendum did not come true, including estimates that spoke of tens of thousands of jobs that might leave Britain. The House of Lords indicated that early estimates spoke of 75,000 jobs in a very harsh Brexit scenario, but Ernst & Young’s announced numbers decreased from about 12,000 jobs expected in 2016 to about 7,000 later.
However, academic research by Sarah Hall and Martin Heneghan (academics in Britain) on “lost financial jobs” in the United Kingdom points out that the actual transfers were less than first expectations, but it points to the concern that “jobs were not necessarily transferred from London to Europe, but were not even created in London after Brexit, in light of the slowdown in financial employment growth.”
According to the “Ernst & Young” survey, issued in March 2022, Paris was the first destination in terms of the number of employees moving or planning to move to one city, with about 2,800 employees, followed by Frankfurt with about 1,800, then Dublin with about 1,200. In terms of choosing European centers for operations and offices, Dublin topped with 36 companies, then Luxembourg with 29, Frankfurt with 23, and Paris with 21, while Amsterdam with eight companies within the study sample.
The sector map reveals that Frankfurt and Paris were the most prominent destinations for investment banks, while Dublin and Luxembourg attracted wealth and asset managers, and insurance companies were distributed between Dublin, Brussels, Luxembourg and Paris.
Distributed gain between centers
European economic affairs researcher Rayan Rasoul believes, in a statement to Al Jazeera Net, that the European Union’s actual gain appeared specifically in the transfer of part of the assets of the British banking sector and tens of thousands of jobs or future employment opportunities to alternative European centers, but he confirms that what happened was not the birth of a “new London” within Europe, but rather the “fragmentation of financial centers,” as activities were distributed between Paris, Frankfurt, Dublin, Luxembourg, and Amsterdam.
Research by Robert Panitz and Johannes Glückler on post-Brexit financial services transition decisions indicates that the pattern closest to what happened is not a “central transition” to build a single European financial capital, but rather a “minimum necessary transition” to meet regulatory requirements, with increasing functional specialization between several European centers.
According to an academic study by Sean Donnelly, professor of political economy and governance at the Dutch University of Twente, the European Central Bank and the European Commission put pressure on financial companies based in the United Kingdom to transfer activities to the Union by 2022, but the companies chose the cities most suitable for their business models. According to the study, Frankfurt’s strategy remained stronger in banks, while Paris succeeded in modeling a financial network distributed among European cities with French coordination.
Economic analyst Mohamed Ghazi Al-Marouh told Al Jazeera Net that Paris, Frankfurt and Amsterdam “partially succeeded in seizing some of the activities that were based in London,” but they did not achieve the “big gain” that many expected after the referendum. He believes that France and Germany benefited from the transfer of some financial decision-making centers, but these sectoral gains did not translate into broad European profits.
An ongoing global situation
The GFCI 39 Global Financial Centers Index, published in March 2026, placed London in second place after New York, with the British capital continuing to lead the Western European region.
The City of London (The City UK) ranked the British capital higher in 2026 than New York, Singapore, Paris and Frankfurt in its own measure of global business supply.
The City UK explains that the United Kingdom remains the largest net exporter of financial services in the world, with a trade surplus of $127 billion in 2024, and that the United States has become the largest trading partner for financial and related professional services in Britain with 35.1% of exports, followed by the European Union countries combined with 31%.
The City of London Corporation says that British financial services exports reached a record high of 120.3 billion pounds ($159 billion) in 2023, and that the trade surplus in financial services reached 92.2 billion pounds ($121.8 billion), driven in particular by an increase in exports to the United States.
The City UK says that the assets of the British banking sector amounted to $13.3 trillion by the end of the third quarter of 2025, and that London hosts more than 160 foreign banks or branches, and that the United Kingdom accounts for 38% of the global foreign exchange market turnover, with US dollars being traded in Britain twice as much as what is being traded in the United States itself.
The City of London and New Financial indicate in a joint report in 2026 that the interconnectedness between EU and UK markets remains a “remaining reality”, as European banking activity related to British institutions has increased by 60% since the secession referendum in 2016, two-thirds of euro-denominated derivatives trading still occurs in London, and a fifth of EU-resident funds are managed from the UK.
Financial derivatives denominated in euros are financial contracts (such as futures contracts) that are priced and their profits and losses are settled in the common European currency, not in dollars or sterling. They are called derivatives because they do not have value in themselves, but rather their value is derived from the price of something else called the underlying asset, such as company shares, government bonds, oil, gold, and so on.
