Brexit must not be allowed to restrict trade or freedom of location for Britain's financial services companies, said the head of the UK's market regulator on Thursday.
Andrew Bailey, chief executive of the Financial Conduct Authority, said that the economic and financial cost of losing open markets would be too great to bear and was not a necessary response to Britain's decision to leave the European Union.
Relocation fears addressed
He addressed concerns that banks and other financial services may find it preferable to relocate within the EU rather than face the costs of researching and implementing a Brexit strategy once terms have been agreed.
"When I hear people say that firms need to relocate in order to continue to benefit from access to EU financial markets, I start to seriously wonder," said Bailey in a speech on Thursday morning.
He added: Does Brexit have to mean abandoning the benefits of free trade and open markets in financial services? It should not."
Back in February, Paris’ financial centre sent delegates to London to try and persuade City-based bankers to relocate to the French capital.
Some companies have already stated they will moving some staff. Barclays and Morgan Stanley are among those reportedly considering relocating some jobs to Dublin.
Lloyd’s of London, the insurance business, has said it is to establish an office in Brussels in a bid to avoid losing EU customers.
Writing in the New Statesman last year, Anneliese Dodds, who sat on the European Parliament's Committee on Economic and Monetary Affairs, said: "If negotiations descend into each side trying to steal business from the other, neither will win."
Costs too high
Certainly the costs of relocation would be eye-wateringly severe.
Research by Synechron, a financial services consultancy and technology group, suggests relocation to financial centres in Amsterdam, Dublin, Paris or Frankfurt would cost firms an average of £50,000 per employee.
Tim Cuddeford at Synechron said: "Other cities may be just as competitive and worth considering as long as there is access to a similar talent pool and infrastructure."
But Bailey said it was important to retain the institutional structures that underpin financial markets and free trade.
"That is what it means to have the world's leading financial centre here in London," he said.
He continued: "Brexit is undoubtedly a very big development, but it should sit within the overall scope of how to arrange the institutions of state to enable trade to happen while maintaining the public interest in stable, safe and fair financial services."
London expertise crucial
Other critics of relocation point to the foreign exchange market.
In the 2016 foreign exchange survey by the Bank for International Settlements 37% of the $5tn global daily forex trade was conducted through London.
The next biggest was New York with 19%. The biggest European centre for forex trade was Paris with just 3%.
Finding the expertise – both financial and technological – to set up or expand existing trading desks would not be straightforward.
"The likelihood is London will remain the pre-eminent financial centre in Europe for the foreseeable future," said Alex Howard-Keyes, investment banking partner at executive search firm Alderbrooke.