Knight Frank is warning that changes to regulatory supervision of the European Central Bank could, if they went the wrong way, damage the already-fragile prime central London lettings market.
The estate agency says the EU has pulled back from an early confrontation with the UK over the relocation of euro clearing operations away from London.
Although no firm decision has yet been taken, this softening of positions could mean that the hundreds of billions of pounds’ worth of euro clearing traded every day in London - and the tens of thousands of City jobs linked to it - could survive in the long term.
As well as the potential direct impact on jobs, the negotiating stances by the UK and the EU in relation to euro clearing “will set the tone for wider negotiations regarding a sector that plays an important role driving demand in the sales and rentals markets in prime central London” according to a statement from Knight Frank.
The agency’s head of lettings, Tim Hyatt, believes there are potentially wider implications for the London housing market given that about half of tenants in prime central London come from the financial services industry.
“Landlords have already had to accommodate a number of significant reforms. Any meaningful movement of financial services workers would make a notable difference to the supply/demand balance. The number one priority for landlords is speed of let and tenant covenant. The more positive noises on the outlook for euro clearing in London will be welcomed by landlords” he says.