Britain is facing many challenges in light of the recent Brexit referendum. As public policies and reforms are becoming clearer for Theresa May and the federal government, reflecting upon the state of the private sector is needed. As you may already know, London is known as the financial hub of Europe. As well as being home to the European Banking Authority and the LSE, third most important stock exchange in the world with a market cap of 6.06£ tn in 2014, London has been a predominant player in the evolution of financial markets. The city’s institutions helped develop trading tools and financial products such as derivatives and Eurobonds all along the 20th century. Nowadays, London is the main center for the foreign exchange market, the largest financial market worldwide in terms of volume, derivatives, international debt securities, as well as metals and many more. Realistically, Brexit means that this industry which employs over 320,000 professionals is in danger and, according to Brussels-based Bruegel, 1.6£ tn of its business could be moved.
While the discourse often only includes finance, many vital sectors in London are actually linked together. Invoking Article 50 of the EU treaty also meant that accountants, communications specialists, consultants and IT professionals are as much in jeopardy as investment bankers and traders are. It is no hush-hush that major institutions and banks are planning to relocate jobs across different cities in Europe. While country authorities and central banks might run to steal London’s capacity to attract capital and labor, the EU needs to oversee the 27 other markets in order to ensure that integrity and stability is unbroken. Greater disparity implies greater risk and less strength within the Union in case of another financial meltdown. Surely imperative trade deals will be made between the UK and the EU, however being inside this single market is not identical as having access to that market. London currently has the greatest financial services surplus in the world; with more than two thirds of it coming from trade within the EU.
Here is what was understood from key executives regarding their businesses’ future in London.
− HSBC: 1000 out of the 5000 investment-banking staff and about 20% of its operational revenue could be moved to Paris.
− UBS: 1500 out of the 5000 investment-banking employees may be relocated to Spain or Germany.
− JPMorgan: 4000 out of the 16,000 current jobs are in danger from being transferred to EU-member countries.
− Bank of America: Most likely to deploy top executives and bankers across several different cities in Europe.
And according to PwC, there could be 100,000 fewer jobs by 2020. Although, many do believe banks and institutions are bluffing: nonetheless several players have already put their plan into action and have ongoing negotiations across Europe. However, this fragmentation is beneficial for London as no single other city is targeted by all banks and institutions, so that there is still hope for the UK capital to thrive. The regulatory structure needed to monitor a huge inflow of banks, meaning capital, labor and infrastructure is not quite attained in any city in the EU. For Switzerland, Brexit may imply gaining an outside-EU ally, but may correspondingly be an important competitor regarding low-tax business location. Switzerland’s 18% corporate tax rate is just under UK’s 20%; however operational costs are higher in the Confederation. Brexit also made the Swiss-franc appreciate even beyond expectations, as instability in Europe is on the rise. Ultimately, Swiss finance minister, Maurer, believes that the country could actually benefit from Brexit.
Julien David Mousseau
