Deal or no deal, Brexit is driving money out of London

Brexit

British Prime Minister Theresa May's Brexit deal lay in shambles last week when the Parliament voted against it with an overwhelming majority. After winning the no-confidence motion, May has bought herself some time to decide on how to leave the European Union. But the uncertainty is already driving businesses out of London.

Finance companies and big banks have decided to move their money out of the UK, with Frankfurt being the preferred choice for most of them, Bloomberg reported. Five of the biggest banks with customers mainly in continental Europe plan to move as much as 750 billion euro of balance sheet assets to Frankfurt.

Sources told the agency that Deutsche Bank is withdrawing at least 400 billion euro from the UK and JPMorgan Chase will move 200 billion euro to Frankfurt over the next couple of years.

Trading venues and traders that provide a bulk of the volumes have moved to Amsterdam. After the tentative Brexit date of March 29, trading venues will have to be physically present in the EU to ensure that firms in the bloc get access to them.

Many trading venues are opening up their services in Europe. For example, BrokerTec, CME Group's entity for short-term funding, will be moved to Amsterdam from March 18. CME is also moving its European government bond venue and its separate EBS foreign-exchange forwards and swaps market to the city.

In clearinghouses, London's LCH is most likely to cede business to Europe. At the end of 2018, Germany's third-biggest fund manager Union Investment had announced that it would shut its swap positions at LCH and switch to Eurex Clearing in Frankfurt. If there is a no-deal Brexit, LCH has been granted 12 months to clear swaps for its European customers, but that may not be enough to make Union Investment and other firms stay.