Britain’s financial services industry has emerged largely unscathed so far from the build-up to Brexit, with about 2,000 roles expected to have moved or been created overseas even as the risk of a disorderly exit grows, a new Reuters survey showed. Many bankers and politicians predicted Britain’s vote to leave the European Union in a 2016 referendum would prompt a mass exodus of jobs and business and deal a crippling blow to London’s position in global finance.
But the number of jobs UK-based financial institutions say they actually expect to shift overseas has fallen steeply from the 5,766 predicted to move in the event of a no-deal Brexit in the last survey in September. This new estimate is about a fifth of the 10,000 flagged in the first survey in September 2017.
A no-deal Brexit would mean Britain leaving the European Union without an agreement on trade. Currently, the UK is on track for such a scenario because a deal giving London and Brussels a 21-month transition period to negotiate a trading relationship is at risk of collapse. Most bankers, however, are confident a compromise will be hammered out. They are waiting to see what will be agreed and what the relationship will be, before making any final decisions about relocations.
The survey results are based on answers from 132 of the biggest or most internationally-focused banks, insurers, asset managers, private equity firms and exchanges to a survey conducted between Jan. 3 and Jan. 28. The jobs are equivalent to 0.5 percent of the 400,000 people who work in financial services in London.
Meanwhile, top investment banks plan to hire far more people in London than anywhere else in Europe, indicating they expect Britain will remain their main regional hub, at least in the short term, a separate Reuters survey showed.
“It will be a slow burn. We won’t know what the full impact will look like for at least 10 years,” said Catherine McGuinness, the de facto political leader of the municipal body that helps to run London’s financial district, known as the City. “But the City is always changing and it will find a way to thrive.”
Bankers’ sanguine outlook comes even as the United Kingdom is on course to leave the EU in 52 days without a divorce deal, a step that could send shockwaves through financial markets. British lawmakers last week instructed Prime Minister Theresa May to renegotiate a Brexit divorce deal, a move that is fiercely opposed by other members of the bloc, meaning there is likely to be weeks of political brinkmanship.
The survey findings suggest London, which has the largest number of banks and the largest commercial insurance market in the European Union, is likely to remain the region’s centre of international finance. The decision to leave the EU has jolted London’s finance industry, which has been a critical artery for the flow of money around the world for centuries.
Banks and insurers in Britain currently enjoy largely unfettered access to customers across the bloc in most financial activities. Elements long taken for granted, such as the right to buy and sell products in a single market, are suddenly in flux. Under a worst-case no-deal scenario, consultants Oliver Wyman predicted as many as 75,000 jobs could go, while the London Stock Exchange suggested two years ago that figure could be as high as 232,000.
The future of London as Europe’s financial centre is one of the most important outcomes in the Brexit talks because it is Britain’s largest export sector and biggest source of corporate tax revenue. Large investment banks are expected to have moved about 890 jobs, just under half the number expected by end-March, according to interviews with more than two dozen industry sources.
Bank of America is moving about 200 employees to Paris by the end of February, according to sources. The bank declined to comment. But many other finance companies are holding off staff moves until the political situation becomes clearer.
HSBC, which has publicly said up to 1,000 jobs could move to Paris, has so far not moved any staff, according to a source at the bank. Royal Bank of Scotland, which said it could move 150 employees to Amsterdam, also has not moved any employees, a source at the bank said.
Under the terms of the current divorce deal, only a basic level of access to the bloc’s markets will be maintained after Brexit, but if Britain decides to leave the EU next month without a trade deal this would mean no transition period to lessen the turmoil.
A senior executive at one U.S. investment bank said they would have to potentially double or triple the number of staff moved overseas if Britain leaves the EU without a trade deal. So far, the executive added, the impact of Brexit had been much less than expected and was less of a concern than the slowing economy in China and political upheaval in the United States. “It’s a real pain in the arse, but it’s a technical problem, it’s solvable,” the executive said.
Ninety of the companies that responded said they would have to move staff or restructure their businesses because of Brexit, although only 59 specified numbers. The rest said it would have no impact or they were still deciding what to do or they declined to comment. For the first time since Reuters started surveying City financiers on their job plans, a handful said there was a possibility Brexit might not happen at all because of the lack of agreement within British politics over how an exit can be engineered. But the companies said they would not reverse the job moves if Britain were to remain in the EU.
“The issue of political risk has become a really significant issue,” McGuinness said. “Even if you turned Brexit back, which I can’t see happening, I think we have damaged our international image and we are going to have to work very hard to regain it.”