BREXIT: UK Could Lose 40,000 Banking Jobs To EU - Report

By Tara Oakes

     BRUSSELS (MNI) - Up to 40,000 jobs in banking could leave the UK for the

European Union after Brexit, a report published by consultants Oliver Wyman said

Tuesday.

     The report, which focuses specifically on wholesale banks, also forecasts

increased costs of up to 4%, or $1 billion, across the industry after Britain

leaves the bloc.

     The numbers are a marked shift upwards from the group's 2016 forecast,

estimating that a hard Brexit would lead to a departure of up to 35,000 jobs

across the whole financial service sector in the medium term.

     While the report says they continue to believe this a "sound estimate of

the impact in the medium-term", the long-term prospects are dimmer for the City

as a financial hub.

     "[T]he EU faces a number of broader policy questions about the future

structure of the Euro financial system and whether elements of it, such as

clearing, can continue to be provided from London," it reads.

     "We continue to estimate that such a long-term shift in the wider financial

markets ecosystem towards the EU could move around 35,000-40,000 jobs from the

UK to the EU in wholesale banking alone," it adds.

     Rising costs are also likely to hit banks, some of whom have already taken

the plunge and relocated to Frankfurt, Amsterdam, Dublin and elsewhere in

mainland Europe.

     "A hard Brexit can therefore be expected to fragment the European wholesale

banking market. It will also make it significantly less profitable. We estimate

that the wholesale banking industry would need to find $30-50 billion of extra

capital to support new European entities, equivalent to 15-30 percent of the

capital currently committed to the region by wholesale banks," the report reads.

     Increased costs related to duplicating operations in an EU subsidiary --

foreseen to be primarily in risk, compliance and finance -- will push up banks'

annual cost base by around 2-4%, the report said. This may prompt some banks to

redeploy entirely to Asia or the U.S., it adds.

     Uncertainty surrounding the ongoing Brexit negotiations is hampering some

banks' strategies and leading to short-term steps which risk drawing them into a

"structurally unprofitable position", Oliver Wyman warns.

     "So long as the outcomes of the Brexit negotiations remain unpredictable,

banks must act as if a hard Brexit is coming," the report states.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com