Banks flee the City post-Brexit taking more than £900bn in assets with them
If you thought the Brexit saga was over, think again. New research reveals UK firms are looking to the continent for business and relocations are set to continue.
Figures compiled by think tank New Financial make for sobering reading and reveal the extent of just how much Brexit will face the change of the City.
More than 440 firms in banking and financial services have relocated part of their business, moved employees or set up new entities in the EU following Brexit.
Banks have moved or plan to move more than £900bn in assets to the EU, equivalent to 10 per cent of the entire UK banking system. Insurance firms and asset managers have transferred more than £100bn.
Dublin is the go-to destination for a quarter of firms, followed by 19 per cent choosing Paris, including BNP Paribas, Goldman Sachs and HSBC.
Last week JP Morgan warned it may have to consider moving its UK operations to Europe because of Brexit. The bank’s EMEA headquarters is based in London and has sites across Bournemouth, Glasgow and Edinburgh.
New Financial has identified 7,400 staff moves or local hires following the referendum but expects the number to increase in the next few years.
“The worse news is that this analysis is almost certainly a significant underestimate of the real picture: many firms have slipped below our radar…” William Wright, managing director of New Financial said. “Given the limited equivalence deals in place, over time we expect there to be a drip-feed of business and activity from the UK to the EU.”
The UK’s financial services industry has been largely cut off from the EU, its biggest customer, since the Brexit transition period ended on 31 December as the sector is not covered by the UK-EU trade deal.
All is not lost
But it’s not all bad news. Once the dust has settled more European firms are likely to open offices in the UK. Figures show half of the firms already using the current temporary permissions regime to access the market already have a UK presence.
“Brexit was always likely to create change in the dispersal of financial services firms,” Tom Bohills, co-vice chairman of The CityUnited Project. “However this movement has been overwhelmingly in the UK’s favour. Almost 1,500 EU-based financial services firms have applied for permission o operate in the UK.”
On the surface the numbers are stark but there is no doubt London will continue to lead the charge when it comes to financial services.
Companies will continue to keep as much of their business in the City and New Financial’s analysis shows even the biggest relocations represent a maximum of 10 per cent of the headcount at individual firms.
Bohills said London’s pull continues and it “will only accelerate as the EU’s walled garden drives capital and firms to London.”