The United Kingdom is now deep into Brexit planning; working out the details that will separate the sovereign country from the European Union. Brexit is expected to have a significant financial impact on Europe, the United Kingdom itself, and even major trading partners like the United States and Canada. Any analyst looking at the events unfolding would be able to agree that Brexit is the most significant change in finance and trade that we have seen in the last 50 years. Johan Van Overtveldt, the Finance Minister of Belgium, has appealed to companies in the UK to move to Brussels and make it their financial base.
The United Kingdom, or England and London in particular, hosts the world’s largest financial center, ahead of both New York City and Hong Kong. Following recent developments in the UK’s progression with Brexit policy, the European Union is appealing to financial institutions to move their operations to mainland Europe.
Belgium Appeals to Financial Institutions Operating in the UK
Johan Van Overtveldt, believes that Belgium central location and membership in the European Union makes it more attractive for businesses. The Minister also pointed out that Brussels has prestige due to it being the de facto capital of the European Union as well as the headquarters for large organizations like NATO.
He also points out that Belgium is continuing to make its economic environment more attractive, with “Corporate tax rate reduction, tax shelter for startups, a much improved legal framework for crowdfunding” and similar benefits.
The Minister’s announcement may be seen by some as reactionary, and possibly an effort of the European Union to claw something back from the impending separation with the UK.
The United Kingdom Is Confident It Can Retain Financial Institutions
As the undisputed controlling center of international finance, the United Kingdom cannot afford to lose its position. UK Prime Minister, Theresa May, has stated that “The City of London will continue to be a global financial center.” She has told investors that the government is exploring ways to ensure that regulations continue to offer a competitive financial landscape. Currently, the UK can export financial services thanks to uniform EU regulations. Services provided to Europe currently exceed $27 billion USD.
This doesn’t include services provided within the UK and to other markets.
Should Americans Be Worried About Brexit?
An amicable breakup between the EU and the UK should mean that financial trading stays stable. What most investors want is for the status quo to remain. If terms cannot be agreed between the UK and the EU, then it could raise regulatory hurdles that would disrupt the current flow of financial services.
This could have an impact on international stock markets and interest rates in the United States. The latest United States interest rate increases have already had a negative impact on stock market, so any negative effects of Brexit could do the same.
Although the separation of the EU and UK might seem far away from American investors, it’s still critically important to follow this news and be aware of how the final Brexit in 2019 could change the worldwide financial situation.
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