French leaders are openly plotting to peel off large chunks of the City’s financial industry as soon as Britain leaves the EU. This might prove much tougher than they imagine.

The plans conflict with far more important economic and strategic objectives of the EU, and some of the stated intentions violate existing EU law.

France is rolling out the red carpet for putative refugees from Canary Wharf, hoping to capture the lion’s share of the estimated €600bn to €1 trillion market for clearing in euro-denominated transactions. Some German officials are also eyeing the City, but more discreetly.

"There is a power play going on. It is very clear France and Germany will do everything they can to damage the City and get the business for themselves," said Professor Athanasios Orphanides, a former member of the European Central Bank's governing council.

"But I don't think anybody can kill the City that easily. The EU itself is so messed up right now and the eurozone is so fragile that any shock could tip them over the edge, and when it happens it is going to be non-linear," he said.

French President François Hollande has been notably combative, telling Les Echos that Britain will lose its vital right to commercial passporting “completely” the moment it steps out of the club.  This clashes head on with France's parallel policy of intimate defence ties with Britain.

He has also stated categorically that Europe will stop the City carrying out clearing operations in euros, adding for good measure that the Referendum result is irreversible. It is almost as if he welcomes the result for his own internal motives within the French political system.

Prof Orphanides, now at the Massachusetts Institute of Technology,  said neither Paris nor Frankfurt have the skills or outlook to run an international financial centre of global scale.

"Whatever they try to do, they'll end up shooting themselves in the foot and driving the businesses out Europe. The EU regulations are so costly that I think the City could actually see long-term benefits from leaving," he said.

The City is ranked number one in the Global Financial Centres Index, ahead of New York, Singapore, Hong Kong, Tokyo, and Zurich.  None of the EU's other hubs come close. Luxembourg is 14, Frankfurt is 18, and Paris lags far behind at 32,  behind Calgary or Dalian in China.

The great unknown is whether London's incumbency advantage is 'sticky' in the fluid world of global finance. Chris Cummings from the industry lobby TheCityUK says it is hard to replicate a deep and established market.

David Fuller's view

Here is a PDF of AE-P’s article.

Most of the City’s financial institutions voted for Remain in line with their short-term profits.  However, their longer-term potential should be greater under British regulation and the lower corporate taxes mention last week by current Chancellor George Osborne.

Assuming as I do that Ambrose Evans-Pritchard is largely correct in implying that Germany and France will benefit very little from the UK’s temporary Brexit chaos, further questions will be asked about the EU’s ability to compete by the international financial community.  This is reflected by EU stock markets, represented here by the DJ Euro STOXX 50 Index.