FRANKFURT (Reuters) - Access to ultra-fast internet cables in London is likely to make financial firms reluctant to move out of London even after Britain leaves the European Union, a study by the European Central Bank has found.
The City of London's prominence as Europe's financial hub has been put into question by Britain's decision to leave the EU, which threatens to make it harder for London firms to access the bloc's single market.
But an ECB study found that any withdrawal from London would likely be gradual as firms would be loath to give up on Britain's fiber-optic cables, crucial for ultra-fast electronic trading.
"The UK’s advantage as a hub for trading using fiber-optic
cables, combined with institutional inertia, suggest that any relocation of trading after Brexit, if at all, would likely be gradual," the ECB said in its study.
Around 84 percent of transactions in euro are initiated outside the euro area, with Britain taking the lion's share at 43 percent, according to a survey by the Bank for International Settlement cited in the ECB study.
"Technology has economically important implications for the distribution of foreign exchange transactions across financial centers, as a result," the ECB said.
"Undersea fiber-optic cables provide a competitive advantage to financial centers located near oceans, like Singapore, because they are directly connected to the internet backbone, at the expense of landlocked cities like Zurich," it added.
Reporting By Francesco Canepa; Editing by Balazs Koranyi