Financial services firms operating in Britain have shifted about 7,500 employees and more than £1.2 trillion (€1.3 trillion) of assets to the European Union ahead of Brexit – with more likely to follow in coming weeks, according to EY.
About 400 relocations were announced in the past month alone, the consulting firm said in a report on Thursday that tracks 222 of the largest financial firms with significant operations in the UK.
Since Britain voted to leave the bloc in 2016, the finance industry has added 2,850 positions in the EU, with Dublin, Luxembourg and Frankfurt seeing the biggest gains.
From next year, firms in London will lose their passport to offer services across the EU. They will have to rely on the bloc granting the UK so-called equivalence for them to do business with customers in the region, who account for up to a quarter of all revenue in London.
With the EU far from certain to grant that access, firms are having to beef up their continental presence.
"As we fast approach the end of the transition period, we are seeing some firms act on the final phases of their Brexit planning, including relocations," said Omar Ali, UK financial services managing partner at EY. "This is despite the pandemic and consequent restrictions to the movement of people."
Many firms are still in a “wait and see” mode, and a flurry of further moves could follow soon, according to Mr Ali.
Such shifts remain well short of some estimates made since the Brexit vote. Think-tank Bruegel said in 2018 that London could ultimately lose 10,000 banking jobs and 20,000 roles in the financial services industry while former London Stock Exchange Group chief Xavier Rolet said that the figure might reach 232,000 jobs.
The EY report also noted that as many as 24 financial services firms have said they will transfer assets out of the UK amid uncertainty about the nature of the City of London’s continued access to the bloc.
For now, London still accounts for the lion’s share of of US banks’ assets in Europe. Wall Street’s five big firms underpinned their UK units with $136 billion of core capital at the end of 2019, while the figure for the EU was $45 billion. But more transfers are expected in the coming months.
EU jobs at risk
Separately, an unpublished report from the Halle Institute for Economic Research in Germany says that more than 700,000 jobs will be at risk for EU companies exporting to Britain if the UK and Brussels fail to agree a trade deal , with Ireland aong those hardest hit.
In total, including companies outside the EU that export to the UK, there would be one million potential job losses in a no-deal Brexit scenario.
The research, updating an initial report from February 2019, is still being peer reviewed and is due to be published in the coming weeks.
Germany would suffer the biggest hit, the research said, predicting that in a no-deal Brexit Europe’s largest economy would have more than 176,000 potential job losses at companies exporting to the UK and their suppliers. France could lose over 80,000 jobs, Poland 78,000 and Italy 72,000.
Smaller countries would suffer a bigger hit in relation to the size of their labour market, it said, with Ireland forecast to lose over 35,000 jobs – almost 2 per cent of its workforce. Slovakia, the Czech Republic, Belgium and Malta could lose between 0.5 and 3.4 per cent of their total jobs. – Bloomberg / The Financial Times Limited 2020