Will Brexit trigger an exodus of bankers from the City of London?
How many jobs will move to continental Europe? Up to 70,000 with a loss of £40bn in revenue? How colossal will the loss for the City be? Which other European capital could benefit most from London’s demise? And will jobs start to be moved as soon as Prime Minister Theresa May triggers Article 50 next week?
These are the questions I ask my banking guests on TV every day. Several times a day. And I’m getting the most disparate answers.
JP Morgan chief executive Jamie Dimon, one of the most talented bankers of his generation, was the most plain speaking and the most cautious. He told me he’s still “guessing at this point”. He doesn’t know how many jobs and services could shift from London because of Brexit. “On day one, JP Morgan has to be able to conduct business with our clients in Europe... What nobody wants is to disrupt financial markets on day one so you can’t finance companies. That could be devastating.”
Currently, London is the financial capital of Europe and that’s in part because banks can access the single European market and sell their services freely. As soon as London loses all or part of that access (and it seems only a question of time), certain banking operations and therefore bankers would have to move elsewhere.
Morgan Stanley, Citigroup, Deutsche Bank and JP Morgan have all said they will have to move staff.
According to consultancy firm Oliver Wyman, losing access to the Single Market would cost banks and related financial services £40bn and would put 70,000 jobs at risk. Brussels-based think tank Bruegel estimates London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move €1.8 trillion of assets out of the UK. Other surveys or chief executives have said as many as 232,000 jobs in the City could be lost, but we’ve also heard as few as 4,000. We don’t know how quickly these jobs could be moved too.
Banks may want to start the process of moving jobs soon after May triggers Article 50, but many bankers don’t want to leave London.
Not many cities are as fun, vibrant and international as London. And not many bankers speak French, Spanish or German. Dublin seems a natural successor to London, as it’s the only other place in the EU where they speak English.
Bloomberg reporter Gavin Finch wrote a great article on the benefits of 15 European cities. According to the Movinga index he cited, Dublin is in pole position and Amsterdam is the next-best destination for Brexit exiles, while Frankfurt is in sixth place and Paris is in ninth below Valletta in Malta and Brussels.
Movinga’s index looks at things such as the cost of evening cocktails, and the number of posh restaurants and fashion stores. And we haven’t even talked about the need for good schools (preferably in English), great universities for the banker’s offspring and the regulatory framework to deal with these banks.
Which is why a lot of chief executives of big banks may pick Frankfurt. The German city, already home to BaFin (the federal financial supervisory authority) and the ECB, is shaping up as the top pick for banks such as Goldmans and Citigroup. There you can find one of the few EU regulators with experience overseeing complicated derivatives trading.
Standard Chartered, Barclays and Bank of America, meanwhile, are likely to choose Dublin for their new European hub. Certain companies may also use Brexit as an excuse to move employees to cheaper cities to lower their cost base.
While British bankers seem to be less hopeful when it comes to securing a Brexit deal that will safeguard the UK’s most important industry, all is not lost yet. Maybe protecting financial services will emerge as a real priority for the May government, and maybe EU leaders will let the UK “cherry pick” parts of the Single Market. Why can’t we hope for some sort of miracle?
We may end up with regulatory “equivalence”, a recognition by the EU that the UK’s rules and oversight of specific business lines are as tough as its own. That could mean a continuation or resumption of certain cross-border business and could prove that, against all the odds, foreign secretary Boris Johnson was right when he said of Brexit that “we can have our cake and eat it”.
It’s a long shot, but City chief executives should not lose sight of all the “maybes” still involved in these negotiations. “Plan for the worst, hope for the best.”
Francine Lacqua is editor-at-large for Bloomberg Television. These views are not necessarily shared by Bloomberg.