Brexit will cost 30,000 UK finance jobs, says Brussels think tank | Financial sector
The UK could lose 30,000 jobs in the financial sector as a result of Brexit, but EU rivals must act to avoid importing banking risk to the continent, according to an influential think tank closely linked to the UK. European Commission.
City of London stands to lose 10,000 banking jobs and 20,000 accounting, legal and consultancy positions as EU clients transfer business worth £1.8bn euros (£1.6bn) to the continent after Brexit, according to Brussels-based Bruegel.
According to the economic think tank’s model, Frankfurt would be the big winner, with Paris, Amsterdam and Dublin also making gains. But the researchers warn that a more geographically diverse distribution of financial institutions, without stricter supervision of banks, would increase the risk of bank collapse in the event of an acute financial crisis.
These risks could be reduced and the benefits shared more equitably, the authors say, if the EU takes a common approach to investment banks rather than 27 national systems in a “regulatory race to the bottom” to steal the crown from London.
The analysis is based on the assumption that the UK will leave the single market, as outlined in Theresa May’s Brexit speech last month.
“Brexit carries risks to market integrity and stability, as the EU, including the UK, is crucially dependent on the Bank of England and the UK’s Financial Conduct Authority for oversight of its wholesale markets,” the report said. “Without the UK, the EU27 must rapidly improve its ability to ensure market integrity and financial stability.”
Nicolas Véron, co-author, said the EU faces a mix of risks and opportunities, but has only just begun to discuss post-Brexit financial regulation.
“What is important is that the EU27 finds its feet in the new financial system of the post-Brexit landscape,” he said.
Rather than creating “27 clones of the FCA and the Bank of England”, the EU should instead design “a more centralized coherent architecture”, with central authorities for banking regulation and conduct, Véron added.
The City could be a flashpoint in Britain’s exit from the EU, given London’s outsized role as Europe’s financial hub. Twice as many euros are traded in London as in the 19 single currency countries combined.
Bruegel was an early proponent of “banking union” – the eurozone’s shared but unfinished system of banking rules – and his reports are read closely within European institutions.
Véron expressed optimism for EU action despite the loss of political momentum that many expect in 2017 following elections in the Netherlands, France and Germany.
Barring upheaval, by October 2017, “governments would be in place, which would create a fairly favorable context for decision-making,” he said.