Warning : Brexit, the Financial Exodus is underway

A fragment from the GEAB 121 / Jan 2018:

“Certain financial corporations started to make arrangements and leave the UK territory aiming to preserve their access to the European financial market. According to some Ernst and Young estimates, 59 of the 222 City-based companies have already started moving staff or operations out of the City whilst 22 investment banks expressed their intentions to do the same[1]. All in all, the British losses could be up to 1,800 billion euro, 10,000 finance jobs and 20,000 positions related to professional services according to the Bruegel think tank[2]. Specialists are still divided on the total number of relocated jobs.

Once a company decides to invest in its relocation, there is no turning back. For the moment, financial companies are protecting themselves by shifting a minimum of activity to the Eurozone. In doing so, they protect themselves from the no deal risk. But this does not prevent them from “virtually” moving their activities, knowing financial activities nowadays is mostly virtual… an extra reason why relocations are not so visible yet.

Transition time is needed

In 2016 already, the growth of foreign investment in the British financial sector was 5% lower than in 2015. France and Germany, on the other hand, enjoyed a 25% and respectively 18% increase over the same period of time[3]. The slide of the activity towards the continent is currently happening. However, it is not in the EU’s interest that the City abruptly stops being the main European financial centre. That is why, at the risk of seeing some financial activities escape, a transition time is needed to form a European financial ecosystem able to survive the hyper-competition of Wall Street and Asian financial markets…

This transition will therefore serve both British interests and European restructuring into a multipolar ecosystem[4]. In the framework of Brexit negotiations, besides the conflict between the Commission and the United Kingdom, there is visible competition between the European cities likely to host the financial activities, as private interests are preferring competition to complementarity.

Financial multipolarisation on the European continent… or else..

Paris, Luxembourg, Dublin and Frankfurt are directly competing to welcome the Exiles of the City of London. For now, Frankfurt is apparently the most attractive actor, hosting the Citigroup, Goldman Sachs, Morgan Stanley, Standard Chatered and the Japanese Nomura Holdings, among others… (Read more in the latest GEAB bulletin)

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[1]    Source: The Economist, 06/07/2017
[2]    Source: BusinessInsider, 08/02/2017
[3]    Source: Le Figaro, 01/01/2017
[4]    Source: Le Monde, 13/12/2017

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