Brussels' efforts to lure business away from the City of London after Brexit have largely been thwarted after France snubbed Germany in favour of Britain's financial hub.

Less business than expected will be drawn into the European Union after France sided with its banks, which argued they would lose out if prevented from using UK clearing houses.

A clearing house acts as a middleman to reduce the risk of a firm failing to honour trade obligations. It operates on behalf of firms transferring funds between each other.

After Brexit, Brussels eyed the possibility of forcing trades from UK clearing houses to EU ones. But a deal looks likely to result in fewer clearing house businesses moving across the Channel.

This in part is because one clearing house, London-headquartered LCH, remains a popular choice for banks, having been the clearing house of choice for years.

Brussels, following Britain's vote to leave the European Union, temporarily allowed EU banks to continue using UK clearing houses until June 2025, with the intervening years thought to allow enough time to cut London off entirely.

According to Politico, two issues dominated a final deal between the EU executive, lawmakers and national governments.

These were how much supervision countries would relinquish to the bloc's markets regulator and the number of financial trades required to take place at EU clearing houses.

Perrine Herrenschmidt, from the Brussels office of the International Swaps and Derivatives Association, told Politico: "There is a cost to moving clearing to the EU.

"Reducing European banks’ access to UK clearing houses decreases the strategic autonomy of banks and their clients."

Germany would have benefited from LCH being cut off with potential rival, Eurex, based in Frankfurt. But rivalry between France and Germany resulted in London's gain, with the French reluctant to see Frankfurt win at the expense of Paris.

A feud also resulted over which country's authorities would oversee business, with supervision falling to national financial authorities because the EU market regulator, the European Securities and Markets Authority, holds greater sway outside the bloc's borders than inside.

Paris and Berlin, which dominate the voting among EU governments, have reached an agreement, but it appears the deal will have a minor impact on the City of London.