Brexit impact 'will hit the City', warns Morgan Stanley chief

Britain's decision to leave the European Union and the uncertainty surrounding the negotiations over the exit process will have a major impact on London's financial centre, the Morgan Stanley president said on Wednesday (21 September).

"I do believe, and I said prior to the referendum, that the City of London will suffer as a result of Brexit," Colm Kelleher told Dominic O'Connell on the BBC's Today Programme.

"The issue is how much," he added.

The threat to the UK's financial services sector was laid bare on Tuesday after it emerged that almost 5,500 British firms rely on passporting rights to carry out business across Europe.

A letter by financial services watchdog the Financial Conduct Authority (FCA) to the head of influential Treasury Select Committee set out the widespread use of the system, which seamlessly allows UK firms to operate throughout the European Union's single financial services market.

The letter by FCA head Andrew Bailey said that 5,476 UK firms currently hold a total of 336,421 EU passports, while 8,008 European businesses use a total of 23,532 passports to provide financial services in the UK.

"I am convinced that London will retain its reputation and prestige as a global financial services centre, but clearly some size of our businesses will have to be moved out of London and into Europe with the absence of any passporting agreement," Kelleher added.

"It's very hard to ascertain what that means at the moment. I do think generally though that capital markets in Europe will shrink as a result of this."

The Morgan Stanley chief added the lack of clarity about the post-Brexit scenario was also proving to be detrimental to the City.

"It is that uncertainty which is causing problems," he said.

"You will see a slowdown in investment into the UK because people and corporations like certainty before they invest. So the sooner we get some clarity on where we're heading the better."