Brexit caused very few finance jobs to leave London
SPIC AU The Treasury’s select committee in January 2017, Xavier Rolet, then managing director of the London Stock Exchange, warned that a sufficiently deep divorce could cost Britain 232,000 jobs in financial services. Such sadness was common, as was the expectation that the loss of Britain would be the gain of others. Frankfurt and Paris are preparing to welcome hordes of bankers expelled from London.
Four years later, the government’s version of Brexit has been harsher than most City bosses’ nightmares. An industry that contributes 7% of GDP and 11% of its taxes were excluded from the trade agreement signed with the EU. Almost immediately, the Amsterdam stock exchanges dethroned London as the main trading venue for European equities. During the month of January, London derivatives trading platforms lost three quarters of their euro volumes to Amsterdam and New York. In the following months, hope that the EU would grant Britain “equivalency” status for various missing financial activities. UK businesses are left with two financial functions – settlement and clearing – which they can perform to EU customers, out of forty. And these exemptions are temporary, expiring in June 2021 and June 2022 respectively.
So far, however, the outflow of jobs has been minimal. According to EY, a professional services company, financial services companies have moved 7,600 jobs from Britain to the EU since 2016. New Financial, a think tank, numbers 7,400. EY looked at 222 companies, New Financial 441. This compares to 190,000 jobs in financial services in the city and 67,000 in Canary Wharf, and 1.1 million across the industry. Why have so few left?
Start with what the changes in Europe’s financial plumbing actually mean. The stock exchange platform movement conjures up an image of auction traders dropping out of municipal stock exchanges en masse and heading to the Netherlands. In fact, the London Stock Exchanges and Amsterdam Stock Exchanges have long been online platforms. Mainframes hosting transactions can now be located outside of Utrecht rather than in the Home Counties, but traders typing on keyboards do not need to travel.
Meanwhile, banks are moving as few jobs as possible to keep regulators happy. This includes certain senior executives, salespeople, traders, risk and compliance managers. But of the ten banks surveyed by The Economist of their plans, none said they intended to displace more than a few hundred people. JP Morgan, whose parent company CEO warned in 2016 that Brexit could cause the bank to cut 4,000 of its UK jobs, will have moved fewer than 400 by the end of 2021. Morgan Stanley, who has passed the day after the referendum to deny the information that he had started to move 2,000 employees to Dublin and Frankfurt, moved 150.
As Brexit approaches, Paris and Frankfurt have played a role in London’s business, but they do not have its attractions as a place to live. In a survey conducted by the Boston Consulting Group and The Network, a group of online recruiters, published in March, respondents from 190 countries named London as the place where they most wanted to settle. Convincing many well-off bankers to abandon the city’s cultural life – and, more importantly, posh schools – is proving to be a difficult task.
Competition also lacks critical mass. The north of England exports more financial services than France, while Frankfurt’s financial sector as a whole employs fewer workers than London’s fintech companies. And while the French and German governments are keen to attract business, the EUIts more modest aim is to reduce its dependence on Britain and deepen its own “capital markets union”. As a result, companies are skeptical that the bloc will be an engine of future growth.
This does not mean that it will be easy for the City. Spat on clearing is likely when its temporary equivalency designation expires next year. A question mark also hangs over the authorization of UK asset managers to oversee EU– domiciled investment funds. But waves of job cuts are not yet on the horizon.■
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This article appeared in the Great Britain section of the print edition under the title “Remainers”