Credit rating agency Standard & Poor’s (S&P) warned the United Kingdom that a possible “Brexit” would push banks away from London, putting the current financial centre into jeopardy in losing its dynamics.
In a new report, S&P said while London would “maintain its status as a global financial center,” a possible exit from the EU would push banks to consider relocating their basis for European operations.
According to the rating agency, since London is the principal global hub for banking and financial markets, “Post-Brexit, the center of gravity in European financial markets could well move further toward Frankfurt, Paris, Dublin, or beyond.”
As British Prime Minister David Cameron, the leader of the Conservative Party won majority in May 7 election and promised to hold a referendum on EU membership by the end of 2017, Britain’s possible exit from the EU is debated.
Analysts believe that UK leaving the union would hurt its economy, but S&P’s credit analyst Frank Gill said the extend of the negative impact would depend on what alternative free trade arrangements the UK government could agree with European partners in the event of an exit. “Without these rights, we see a risk that enough major global banks could choose to route their business through other financial centers in the European Economic Area (EEA) that retain those rights.”
After the government’s statements in ensuring the decision to hold a referendum on EU membership, in the beginning of June S&P downgraded UK’s sovereign rating outlook to “negative” from “stable,” keeping the AAA rating.
Meanwhile, another major rating agency Moody’s also warned the UK that leaving the EU would put it off from common market, thus threatening the country’s current rating, which is one notch below the top triple-A score.