Time to change your default settings?

London has long been seen as the European capital for financial markets. This has very little to do with regulation – after all, the UK is (still) part of the EU single market. London’s continuing dominance is largely down to ‘network effects’, i.e. the positive benefits of being part of an established ecosystem (in London even the cabbies discuss the impact of MiFID II with you!), and ‘lock-in effects’, i.e. the barrier I face given my past decisions (if I buy a hammer, I’d better go into the nail-hitting business). But with the regulators expecting firms to prepare for a worst-case scenario in the form of a ‘no deal’ Brexit, things are likely to change.

As my colleague pointed out, many firms are already investing a lot of money establishing separate entities in the EU27, but simply counting the number of firms doing so might be a distracting statistic. For now, London is still attractive. In the longer term, however, these firms are likely to want to see a return on their sizeable investment in duplicate infrastructure and so, the next time they think about growing, the default location may not necessarily be London anymore. Whilst Microsoft fought very hard to keep its own Internet Explorer the default browser on Windows, many end users voted with their feet and changed. How much the London default is worth in the context of Brexit is anyone’s guess.

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