The United Kingdom is rightly celebrated as an engine of global finance, with many observers now saying London has supplanted New York City as the world’s top financial center. London is home to a long roster of international financial heavyweights and is regularly ranked as one of the most desirable markets to work in by finance industry professionals.
But there’s a major problem in the United Kingdom’s continued dominance in this industry: Brexit. After voters opted to leave the European Union last year, the financial industry has faced enormous uncertainty. No one is quite certain how or when the formal process of disengagement will occur. It is also difficult to determine what the ultimate impact will be on hiring, job losses or firms migrating overseas.
Job Losses Among Large Banks
The largest banks are massive operations that employ hundreds of thousands of people and oversee complex operations across the globe. As such, they typically do not move with haste. This is one reason why the true effects of Brexit are likely to be felt over a period of years.
The early signs, however, are not particularly promising for U.K. financial services firms and workers. Goldman Sachs, HSBC and JPMorgan have all warned that jobs will be shipped out of the United Kingdom once Brexit is implemented.
There is one major concern: Once the United Kingdom withdraws from the common market and free movement between countries is restricted, large firms may no longer have easy access to the most talented workers. On the flip side, financial services workers who are in the United Kingdom with work permits will also face uncertainty about their jobs once immigration rules are changed.
Extensive Post-Brexit Job Migration
Along with rumblings from the major banks, most of the studies done on the effects of Brexit paint a somewhat pessimistic picture. Bruegel, a Brussels think tank, recently released a report estimates that the United Kingdom will likely lose 30,000 jobs and nearly two trillion dollars as a result of financial services firms shifting assets to the continent. This represents 17 percent of the total value of the British banking sector.
These projections are on the conservative end. Other forecasters have estimated the United Kingdom could lose as many as 232,000 jobs as a result of Brexit. How this ultimately plays out will depend largely on how Brexit is implemented. If the United Kingdom is able to negotiate a “soft Brexit” that leaves much of the existing regulatory, trade and movement cooperation in place, the effects are likely to be less severe.
The Bottom Line
Although the scope of job losses is uncertain, there is no doubt that Brexit will cause jobs and executives to flee to other European markets. The nature of the separation agreement will determine how acute the effects will be.
While hiring in the United Kingdom may suffer, opportunities in France and other continental markets are likely to rise. As a result, the United Kingdom’s loss will be the European Union’s gain, as workers and employers adjust accordingly.
Contact us at Duffy Group, Inc. for more analysis in the financial services industry.