Brexit: Who is Taking London’s Finance Jobs?

The failure of Theresa May’s Brexit negotiations to make quick progress has pushed banks and other finance firms in the City of London to begin moving tens of thousands of jobs abroad.

So where are they going? Is Frankfurt scooping up the lucrative rewards of Britain’s decision to leave the EU and place new legal and regulatory barriers between the UK’s single most valuable industry and its European customers? Or is Paris’s aggressive poaching campaign paying off, with Dublin, Amsterdam and Luxembourg also trying to win some of the billions of pounds in financial activities that have made London the world’s biggest international finance centre?

Why The Rush?

The directors of UK and foreign finance firms say they have no choice but to begin moving at least some of their operations to the EU right now. More than 15 months after the Brexit referendum there is still no clarity about what activities London-based firms will be able to carry out in the EU, and although there are 18 months to go until Brexit on March 30, 2018, the finance companies say they must have their alternative arrangements in place six months before then.

That leaves just 12 months to move people and activities to new or expanded operations inside the EU, and it usually takes 12-18 months to win licences and regulatory approval for finance firms such as banks, insurance companies or asset managers.

That is why finance houses have already had to make their choices about where to transfer people and operations, unwinding 25 years of concentrating their activities in London to take advantage of the “hub effect” of being in the City of London or Canary Wharf.

While Frankfurt is established as the main banking centre on the continent, hosting the European Central Bank and many other international finance bodies, it is now clear that the shift from London is not playing out as a simple shift from one hub to another. Bank of America has chosen Dublin as its European hub, HSBC decided to move 1,000 employees to Paris and Lloyds has selected Brussels for its insurance company operations.

Taking the Spoils

William Wright, the managing director of the capital markets think-tank New Financial told Felix Magazine the key trend is fragmentation, as the jewels of the City are heading off to different cities.

Frankfurt (left) and Dublin have been the main winners followed by Paris and Luxembourg, according to Wright, but jobs have also gone to Amsterdam, Milan, Madrid, Krakow and elsewhere.

Lisbon has won some back-office finance jobs alongside Latvia, Estonia and Slovenia and one insurance company is moving jobs to Malta, which is competing on the basis of its warm climate, English language skills and a legal system based on the UK’s. The exercise of carving up London operations has also seen some activities moved outside the EU to Asia or even the US to save money, and some backroom jobs will be shifted to cheaper cities in the UK.

Paris and Dublin have run the most aggressive efforts to lure business from the City, while Milan city officials have worked with their regional and national authorities to offer incentives to woo Italian bankers back from London.

A powerful trend is that many finance companies are fragmenting their own operations to take advantage of the fact that various cities have specialised in different finance activities. Frankfurt, for instance, is attractive to investment banks but Luxembourg has an attractive regulatory environment for insurance firms and asset managers.

Splitting Up

New communication technology is making it easier to base a firm’s operating units in different cities, and splitting up those units has been facilitated by the fact that different units are often already split between separate buildings in London.

Wright says the fact that most firms built up their London operations by acquiring other companies meant they were left owning or leasing various buildings so they have already physically separated their trading, IT and back office operations.

Tom Theobald, of the development agency “Luxembourg for Finance”, told Felix that J.P. Morgan, for instance, “is sending its investment bankers to Frankfurt, some other activities to Dublin, and its wealth management and corporate banking to us.”

“We expect up to 3000 jobs to be created over the next two or three years because of Brexit but 80-90% of the workers will be sourced locally,” he said. “The managers will be moving from London but not the bulk of the jobs.”

A Reuters survey in August and September found that six of the major banks that said they had already decided to move jobs away from London because of Brexit had opted for Frankfurt while other winners were Paris (four banks), Dublin (three), Amsterdam (two) and Berlin and Brussels (one each).

Among insurers, seven were setting up subsidiaries in Luxembourg, six in Dublin, three in Brussels, and one each in Malta, Munich and Paris. The most popular destination among asset managers was Luxembourg, which has attracted seven of the nine firms that said they were looking to move jobs.

by Peter Wilson

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