BrexitJan 31 2019

Chancellor warns City faces bigger problems than Brexit

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Chancellor warns City faces bigger problems than Brexit

The financial services sector faces far bigger long-term challenges than Brexit, according to chancellor Philip Hammond.

Speaking at a CityUK event in London last night (January 30) Mr Hammond said he understands the financial services sector's frustration at the ongoing Brexit process.

But he said while navigating Brexit in good order is clearly the industry's most immediate task it is not the only challenge on the horizon.

Mr Hammond said: "Nor, over the long-term, is it necessarily the most significant.

"The City would be facing profound change, even if we were not leaving the European Union.

"The global economy is changing; an irreversible shift of wealth and power is taking place.

"Dramatically higher savings rates in some emerging market economies and the growth of a vast new middle class mean the geographical balance of asset holdings is changing at a breath-taking pace.

"At the same time, the technology revolution is having a profound impact on our economy and society forcing us to take radical action to ensure we have the skills and talent we need for the future."

He said he regards the deal parliament has voted on as the best way to exit the EU, but said that after Brexit the European Union will become a smaller part of the UK's financial services sector.

Mr Hammond said: "Our historic relationships mean we are uniquely well-positioned to build trade and economic partnerships with the fastest expanding markets.

"We should not underestimate the significance of the change that is underway in the global balance of financial power nor the scale of the opportunity it represents.

"Emerging and developing economies together are home to 85 per cent of the global population and 90 per cent of people under 30 and their economies already account for nearly 60 per cent of global economic activity and one third of global trade but they account for just 10 per cent of the global financial system.

"So, as savings accumulate and the new middle class grows exponentially there is an enormous opportunity for the City."

Mr Hammond was a supporter of the UK remaining in the EU at the time of the referendum in 2016.

david.thorpe@ft.com