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Free AccessUPDATE: UK Could Lose 40,000 Banking Jobs To EU - Report
--Adds Frankfurt Main Finance, Luxembourg comments
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, Luxembourg and
elsewhere in mainland Europe.
A Luxembourg official said Tuesday that they were not out to poach bankers
from the City of London, with whom they have a "very fruitful relationship".
"Luxembourg has not positioned itself as vultures circling around the Tower
of London waiting for all those jobs to fly out our way," the source said - but
added that they were always trying to attract new operators to the financial
centre.
"[I]f there are actors currently operating in London who feel it would be
of benefit to strengthen their operations in Luxembourg they are of course most
welcome to do that," he said.
Hubertus Vaeth, Managing Director of Frankfurt Main Finance, told MNI he
stuck to his figure, first touted in June 2016, that 10,000 banking jobs could
move to Frankfurt post-Brexit.
"Frankfurt is rarely first on banks' list, but we're always second or third
and it's the balanced strengths of the city which make it the best alternative
to London," he said.
The fragmentation of different choices for banking locations could dissolve
the very idea of one single financial hub in Europe, the report says.
"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 $30-50 billion of extra
capital to support new European entities, equivalent to 15-30 percent of the
capital currently committed to the region by wholesale banks," the report reads.
Increased costs related to duplicating operations in an EU subsidiary --
foreseen to be primarily in risk, compliance and finance -- will push up banks'
annual cost base by around 2-4%, the report said. This may prompt some banks to
redeploy entirely to Asia or the U.S., it adds.
Uncertainty surrounding the ongoing Brexit negotiations is hampering some
banks' strategies and leading to short-term steps which risk drawing them into a
"structurally unprofitable position", Oliver Wyman warns.
"So long as the outcomes of the Brexit negotiations remain unpredictable,
banks must act as if a hard Brexit is coming," the report states.
--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$B$$$,M$E$$$,MC$$$$,MI$$$$,M$$DR$,MGB$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.