Relax – there’s no sign of the City of London losing its euro clearing crown despite Deutsche Bank job moves | City A.M.
How many jobs will London’s financial sector lose as a result of Brexit?
This longstanding question, attracting wildly different estimates, remains far from being answered. Prior to the referendum, several five- and even six-figure numbers were bandied around, while recently much smaller estimates have been touted. Just last week Bank of England deputy governor Sam Woods again played down fears of a Brexodus when the UK officially leaves the EU next year.
Referring to the Bank’s 5,000-10,000 forecast range, Woods said: “I think it will be at the bottom end of that range. If anything, it might be slightly below that.”
The City of London’s forecast starts lower, at 3,500, rising to 12,000 – a fraction of the UK’s financial jobs base. Thus job losses so far have been relatively small, and are expected to remain modest next year. There is, admittedly, a lingering doubt about the medium- and long-term outlook – especially if London’s dominant clearing industry comes under serious threat from rival financial centres.
Read more: Deutsche Boerse’s new boss eyes quarter of euro clearing after Brexit
Reports last night said that Deutsche Bank has moved a chunk of its euro clearing activities from London to Frankfurt, joining several other large banks to take up an incentive scheme put in place by German stock exchange Deutsche Boerse.
Given the importance of clearing (nearly all predictions of mass job losses stem from the possibility of London losing its euro clearing crown), such stories understandably raise concern. However, it is important to view them in context.
While Deutsche Boerse has been successful in significantly increasingly its clearance of short-term derivatives, it has started from an extremely low base. The wider market of longer-term products is still dominated by London with no sign of the situation changing any time soon.
Read more: Moving euro clearing away from London threatens global financial services
London clears around 15 times the amount of euro denominated interest rate swaps as Germany. And investors certainly don’t seem worried – the London Stock Exchange’s share price is up 23 per cent since January this year. It is difficult, impossible even, to sugar-coat the way Brexit negotiations are going. Every sign of the UK losing business should act as a warning to the government over how much we have to lose from a bungled deal.
But while Theresa May and her colleagues should always have one eye on the health of the country’s most successful industry, there is no reason to fret about the future of the City quite yet. London’s competitive strengths are unparalleled, deep, and as relevant as they’ve ever been.