Plus, the U.K.’s London financial services have a lot of clout. The EU needs financial clout these days. But when Prime Minister Theresa May triggers Article 50 in March, the European Union is going to lose some financial perks that can’t be replaced. One of those perks is Britain’s defense spending.
Some EU members are nervous about Brexit because of the Russian situation. They know Britain and France are the only countries with nuclear capabilities. Britain took part in several military operations, training mission, and peacekeeping exercises over the years. Once the U.K. is gone, the EU will have to make other defense arrangements.
Great Britain has a very loud voice on the world stage, and that voice will fade once the exit deal is finalized. EU members don’t always agree. In fact, they rarely agree, but the United Kingdom was able to form coalitions to address some of the serious issues. Britain and France are the only two permanent members of the United Nation Security Council, so the EU’s position in that organization will not be as strong.
The loss of London as a financial hub will be a big miss for the European Union, according to Jim Dondero, the CEO of Highland Capital Management. Dondero is an expert in emerging market investing as well as global investing. According to Dondero, the U.K. accounts for more than 37 percent of all global foreign-exchange trading. And 39 percent of the world’s trading in derivatives. Over-the-counter derivatives. Bank lending is another U.K. specialty. More than 17 percent of all international bank lending happens in London, according to Dondero. The banking issue is unresolved. No one knows if global banks with offices in London will get passporting rights to service other European countries.
But the $6 billion that the U.K. pays the European Union every year to fund the budget is going to create a hole in the pockets of the EU. How the EU will make up the shortfall is still a mystery. According to Dondero and European economists, the EU will be short $13 billion a year once the British exit is completed. That shortfall will put pressure on Germany and other countries that have money. But countries like Spain, Greece, Italy, and Portugal are not in any position to help. In fact, their free spending habits are one reason for Brexit. Another reason is the migration fiasco, and another reason is, foreign workers can come to Britain and take jobs away from Brits.
James Dondero attended the University of Virginia where he earned finance and accounting degrees. He spent four years working as a portfolio manager for America Express before he became Chief Investment Officer for Progressive Life in 1989. Dondero is the co-founder of Highland Capital Management. Jim decided to set up his investment firm in Dallas, in 1993, but he eventually opened offices in Sao Paulo, Singapore, Seoul and New York. Jim sits on the board of MGM Studios, and he is the Chairman of NexBank, Cornerstone Healthcare, and NexPoint. Dondero’s Highland Dallas Foundation supports several nonprofits in the Dallas area every year. The Highland Dallas Foundation supports the George W. Bush Library, the Dallas Zoo and several other nonprofits in the area.