The Bank of England has urged London’s financial sector to have the mechanisms in place to cope with the 21-month post-Brexit transition period agreed on by UK Prime Minister Theresa May and the European Commission.
The deal has been undermined by Conservative backbenchers and uncertainty over whether the Protestant Democratic Unionist Party from Northern Ireland will support a lengthy and costly transition for the UK as it begins the formal process of leaving the European Common Market by March 2019. Britain’s financial sector has warned that it may not be in a position to the fit the bill for a transition deal that is expected to come into force by next autumn.
London is the world’s international financial centre and accounts for 12% of the UK’s GDP, employing 1,1 million people. Almost a third of its business involves clients in the European Union, which makes the issue of financial passporting a central theme in negotiations with the European Commission.
After March 2019, much of that business will move to the Continent, with several cities looking to cash in on the UK’s decision to leave the European Union. Amsterdam, Paris, Frankfurt, Luxembourg, and Dublin have emerged in recent months as new centres for financial services; alas, it is for significant players in the banking sector decide if a mass exodus from London will be beneficial for future business.
Most experts initially believed the City of London would begin haemorrhaging thousands as the world’s banking giants opted to relocate to the Continent. A mass exodus has yet to occur, and the projected number of jobs lost to Brexit-related relocations has halved from 10,000 six months ago to 5,000, according to a Reuters’ interviews with insurers, asset managers, equity firms, and international banks.
More than half of the companies surveyed said they would have to move jobs or go through a thorough restructuring of their business because of Brexit. Germany’s Deutsche Bank, one of the world’s largest foreign exchange dealers, initially projected moving 4,000 staff out of London by March 2019, but it now expects to relocate less than 200. Several other institutions, including Swiss multinational UBS and Goldman Sachs, have reported similar revisions to their original contingency plans for redundancies.
In the months after the UK’s referendum on leaving the EU, the London Stock Exchange predicted the city would lose at least 232,000 jobs as a direct result of Brexit.
While the number of unemployed hasn’t increased as significantly as some had initially thought, Brexit has a significant “opportunity cost” in terms of job creation. In 2017, the number of jobs created in the City of London plummetted 12.5% from the previous year.