For companies in the European Union, London is the chief gateway to finance. Rerouting the financial lines that run through London will be complex, experts say.
London dominates wholesale banking in Europe, a 5.8 trillion euro ($6.2 trillion) industry that includes financing for companies from big multinationals to family-owned firms that are the backbone of Germany's economy.
London is also the first port of call for companies, such as Italian lender UniCredit, selling shares or raising debt. This is because many fund managers and asset managers have a base in Britain.
The Bank of England estimates that half of the debt and equity issued by EU borrowers involves financial groups in Britain. This could be a London bank organizing a sale of European company bonds, for example.
And London houses the bulk of Europe's derivatives market, where car makers buy protection against swings in the U.S. dollar or airlines guard themselves against a spike in the price of oil. More than 7 trillion euros of trading in such instruments is processed in London daily.
Experts expect EU firms and banks gradually to reduce their reliance on London. Governments in France and Germany want to establish alternatives to London in Paris and Frankfurt.
Over time, some of London's wholesale funding will move to other centers in Europe. Thinktank Bruegel predicts that London's share of this market will eventually shrink from 90 percent to 60 percent.
If mismanaged, however, the migration could raise the cost of funding for European companies, the thinktank said.
Bruegel's Dirk Schoenmaker said that if wholesale funding operations are spread across several locations that could lift costs by between 6 billion and 12 billion euros each year because of the expense of using multiple financial centers. That is equivalent to up to 0.1 percent of the remaining 27 EU countries' economic output.
Shifting the multi-trillion euro derivatives business would be difficult, regulators and bankers said. Some derivatives have a term of many decades. It is unclear, bankers said, what will happen when Britain, where the contracts were drafted, leaves the European Union.
They said that the cost of holding such instruments could rise sharply for European banks if a clearing house in London that processes the deal, for example, is not recognized in the European Union.
A transition period, after initial exit talks of two years, could win extra time. But many bank executives, speaking privately, have said they are working on the assumption that there will be no transition.
EU officials familiar with the bloc's preparations for negotiations have told Reuters that they too fear a "cliff-edge" departure of Britain from the bloc. They are pinning their hopes on banks moving to the continent in time and believe this will minimize any fallout for their economies.
(Edited by Janet McBride and Richard Woods)