Under-sea cables give London an edge even after Brexit - ECB
LONDON'S access to ultra-fast internet cables, as well as its longstanding banking sector, give the British capital an edge over rivals and means that financial firms are reluctant to move out, even after Britain leaves the European Union, a study by the European Central Bank has found.
The City of London's pre-eminence as Europe's financial hub is facing an unprecedented threat after Britain's decision to leave the EU. A so-called 'hard' Brexit could make it more difficult for London firms to sell into the bloc's single market.
But an ECB study has found that any withdrawal of finance houses from London would probably be gradual as banks and insurers would be loath to give up on Britain's fiber-optic cables, which are crucial for ultra-fast electronic trading.
"The UK's advantage as a hub for trading using fiber-optic cables, combined with institutional inertia, suggest that any relocation of trading after Brexit, if at all, would likely be gradual," the ECB said in its study.
Around 84pc of transactions denominated in euro are initiated outside the euro area, with Britain taking the lion's share, at 43pc, according to a survey by the Bank for International Settlement, cited in the ECB study. "Technology has economically important implications for the distribution of foreign-exchange transactions across financial centres, as a result," the ECB said.
"Under-sea fiber-optic cables provide a competitive advantage to financial centres located near oceans, like Singapore, because they are directly connected to the internet backbone, at the expense of landlocked cities like Zurich," it added.
That inland handicap could also hit Frankfurt and Madrid. However, Dublin and Paris, which are both close to or at the sea, might eventually replicate London's infrastructure. (Additional reporting Reuters)