A new report by think-tank New Financial finds that EU capital markets continue to underperform, widening the transatlantic gap with US capital markets. Relative to the size of the economy, most sectors of EU capital markets have shrunk over the past decade - with remnants from the financial crisis still present and recovery moving slowly. With the threat of Brexit looming, the urgency to further develop and deepen capital markets in the EU27 is highlighted in the report, stating a huge growth potential.
The UK has one of the most highly developed capital markets in Europe, and with London the beating heart of the European finance industry it is no surprise that underperformance in the British capital have knock-on consequences on overall European performance. Underperformance in London is given as the main reason why EU capital markets have failed to keep up with overall economic recovery. With the important role played by the UK and London it is evident that Brexit will have consequences for the remaining EU27, for capital markets in particular. The authors of the report, William Wright and Panagiotis Asimakopoulos, identify several steps to remedy the current situation, including: the completion of the CMU, the development of deeper pools of capital including pension savings, and improvements of the quality and consistency of financial data across markets. The progress and potential effectiveness of these efforts, however, and the CMU in particular, is hindered by the current uncertainties surrounding the role of the UK and London, in dire need of clarification.