Though there was some initial hope that London’s status as an international financial service hub would persist unaffected by the Brexit — that possibility is seemingly increasingly less likely.
Following U.K. Prime Minister Theresa May’s speech on the Brexit last week, a “flurry of senior financiers” have appeared at the World Economic Forum in Davos to discuss how they can transfer large chunks of their operations of out the United Kingdom.
If May’s goal was to convince Finserve firms to stay in London, it seems it was not a success — she had some work to do in her remarks today (January 19) to convince financial leaders to reconsider.
Bankers have been largely positive about Mrs. May’s speech — and the clarity provided therein — but it seems the information as provided has mostly made it clear that the time is now to relocate out of London. Axel Weber — the one-time head of the German central bank (now the chair of UBS) — told the media that around 1,000 jobs out of the 5,000 or so the Swiss bank has stationed in London will likely be relocated as a result of the Brexit.
UBS is not alone — JPMC has noted that as many as 4,000 of its 16,000 U.K.-based staff will likely be affected as well.
“It looks like there will be more job movement than we hoped for,” JPMC’s Jamie Dimon told Bloomberg TV. “We don’t want to — it is not a threat — it is just a fact that we will have to accommodate the new requirements.”
Bankers has redoubled their resolve following May’s announcement that Britain will be pursuing at “hard Brexit” strategy, as opposed to a privileged Norway style relationship that allows greater access to the European common market. Without the common market — and its passporting rules that allow banks to sell common products throughout the EU without extensively negotiating contracts across every new border — London is a much less desirable hub spot. Its use is further degraded by the fact that the Brexit will also likely strip London of its status as an international hub for Euro clearing.
On top of JPMC and UBS, HSBC has also confirmed plans to move 1,000 roles in its London-based investment bank to Paris. Goldman Sachs, on the other hand, has denied a report in Germany’s Handelsblatt that it will cut its U.K. staff numbers to 3,000 from 6,000 with a partial relocation to Frankfurt.
“There remain numerous uncertainties as to what the Brexit negotiations will yield in terms of an operating framework for the banking industry,” Goldman Sachs said. “As a result, we have not taken any decisions as to what our eventual response will be, despite media speculation to the contrary.”
Mrs. May is due to discuss her Brexit strategy with Wall Street bosses who have large British investment banking operations — including Mr. Dimon — at a private meeting in Davos on Thursday.
Thus far, bankers are predicting a process that will expensive and arduous, but not terribly difficult, when it comes to adjusting to the new order in the EU.
“You need to have a broker and a bank in the U.K., and a broker and a bank inside the EU. We have that already. There will be other small adjustments, but it is as simple as that,” noted one broker.
Others were less optimistic — particularly about the level of difficulty involved in working in both the U.K. and the EU as separate entities.
“This is going to take a lot longer than people think,” the U.S. executive said. “This is about real people and real people have to make decisions,” noted another banking executive — referencing EU-born staff living in London with children.