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UK minister: Brexit means thousands of jobs to go but London's future is bright

The U.K. expects 5,000 financial services jobs to have moved to continental Europe by the time the country leaves the European Union next March, said the City minister John Glen MP.

Glen told members of the House of Lords' EU Financial Affairs committee that he agreed with previous estimates from the Bank of England that this would be the likely number of jobs lost from the City.

However, he also said there was no sign of significant moves by major financial services companies to quit London.

"We have not seen wholesale moves of large City institutions to the European Union," said Glen, the economic secretary to the Treasury and the minister responsible for government policy affecting London's financial district.

The minister said financial services employs 1 in 14 people in the U.K. and generates £72 billion in tax revenue and that he would ensure as much continuity as possible for the U.K. financial services industry post-Brexit.

He did not provide a figure for the number of jobs expected to leave the City in the event of the U.K. leaving the EU without a withdrawal agreement, a so-called "no deal" Brexit. He also refused to be drawn when asked how much of the £72 billion annual tax take might be lost in such an event.

"I think it is extremely unlikely [that there is no deal] and we are not working towards that scenario. The assumption that there would be no deal at any level is unrealistic. It would be bizarre for the EU to have a wholly hostile posture as many of their consumers rely on access to the London for their financial services," said Glen.

'Whatever it takes'

He said he expected London's place as the foremost center for financial services in Europe would continue after Brexit and he would do "whatever it takes" to defend it.

"I recently met the governor of the Bank of Japan and his view was that no single EU financial system would attempt to replicate the ecosystem of the City of London, despite the overtures they had received from other countries," he said.

Negotiators from the U.K. and the EU are due to meet on Oct. 17 when a final agreement between the two sides on the terms of the U.K.'s exit could be agreed. The U.K.'s Prime Minister Theresa May is intending to spend the next few days attempting to convince her own ministers to back the government's plans.

Questioned over why the U.K. had backed down from its initial negotiating demand that the EU accept mutual market recognition of the City's regulatory regime when the U.K. quits the EU, Glen said the EU had simply been immovable on the issue.

"It became clear that the EU would not concede any hypothetical changes to their autonomy," he said.

The U.K. had instead adopted its current plan for a so-called enhanced equivalence regime founded on "strong" bilateral agreements between the two sides.

The EU currently uses equivalence regimes to allow access to its markets for a number of other countries, including the U.S. However, these regimes have come under fire since the EU can unilaterally deny access to its markets at just 30 days' notice. The U.K. wants additional bilateral arrangements to put such an arrangement on a more secure and comprehensive footing including the creation of a dispute mechanism to settle future differences between the two sides.

'Politicization'

The Lords' committee pointed out that Switzerland had recently seen its own equivalence deal guaranteed only for another year by the EU, suggesting that this was the result of "politicization" of the system as EU politicians sought, for their own reasons, to affect the regulatory process.

"The standard 30 day notice period is unacceptable for the U.K. and that is why we need a strong bilateral agreement. Any deal that leaves that vulnerability is unacceptable. We could not agree to that," said Glen.

"What the City wants is a stable outcome that gives a bilateral relationship that removes ambiguity and uncertainty which respects the autonomy of the EU position but respects our autonomy as well."

The committee also noted that the EU had said it was not prepared to consider a deal on equivalence until after Brexit. Glen said the EU was likely to do so as the deadline for a deal approached.

"We expect they will do the right thing when faced with the economic consequences of not doing so," said the minister.

Glen also said the government recognized the importance of the fintech industry, noting it was worth £6 billion a year to the U.K. economy, in which the U.K. was a world leader and would strive to ensure the existing beneficial environment was maintained.

He also said the government would publish further details in the autumn on its plans to allow financial services staff to travel easily between the U.K. and the EU.