Topic: Brexit relocation of London banks and finance to Europe (2024)

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    • "Should I stay or should I go?" London-based bankers and insurance companies are weighing their options to relocate some of their operations to Europe. One and a half year after the United Kingdom voted to leave the European Union, nobody knows for certain what the City of London's future links with the European Union will look like or what Brexit's effect on the UK economy will be. Negotiations between the EU and the UK are still ongoing, with one of the most contentious issues being the Irish border. This led outgoing Bundesbank executive board member Andreas Dombret to say in an interview to German newspaper Die Welt on February 19th, 2018, that banks "are welcome to hope for the best, but should prepare for the worst". This article aims to take a look at the following: 1) Brexit consequences for the London financial sector 2) potential locations for London finance to relocate to; 3) the reasons behind relocation;Text continues below.

    1) What are the potential consequences of Brexit for the London City? The EU did decide on November 20, 2017, to move the European Banking Authority (EBA) from London to Paris. Other than this, potential consequences are difficult to assess as numbers are not final. Consultancy firm Oliver Wyman estimated in August 2017 that a hard Brexit could drive 31,000 to 35,000 jobs out of the UK across all financial services. The London City does house several financial institutions. As of December 2016, four of the six leading banks ranked by total assets in the United Kingdom were located in London. HSBC Holding's total assets value, for example, amounted to approximately 2.4 trillion U.S. dollars.

    2) Frankfurt and Dublin seem to be emerging as the main destinations for the relocation out of London, along with Paris, Luxembourg, Brussels and other potential suitors. Each of these cities has its particular advantages and disadvantages:

    Frankfurt is seen as attractive in terms of supervisory stability and influence, with the presence of the European Central Bank and Deutsche Bank. The city has already attracted UBS, JPMorgan and Goldman Sachs. Predictably, the take-up of office real estate in Frankfurt is growing fast.
    Dublin has the potential to surpass Frankfurt in the end, due to its tax advantages and earlier success in bringing in the European headquarters of big tech companies such as Microsoft, Facebook and Google. However, its location is deemed less convenient than the London City. Barclays has already announced plans to expand into the Irish capital.
    Paris, on the other hand, has an attractive location and is already home to several major wholesale banks and the EBA. Yet, only HSBC and French bankers BNP Paribas, Crédit Agricole and Société Générale have so far announced to go in the direction of the Seine. France has difficulties with strict labor laws, as can be seen by the amount of average usual weekly hours worked in 2015. Between 2000 and 2015, the weekly average was around 36 hours.
    Luxembourg's main selling point is its stability, together with its focus on investment funds, insurance and asset management. AIG, RSA, CNA Hardy and FM Global are examples of companies that decided to move parts of their activities to the Grand Duchy. Indeed, approximately 57 percent of Luxembourg CEOs from the financial sector expected Brexit would impact their industry in a positive way in the next five years.
    Brussels has the presence of the European Union's main governing bodies and supervisors. Lloyds and QBE Insurance Group already made their interest known to relocate to Belgium's capital. Additionally, the Belgian government announced in July 2017 that corporate tax would be lowered from 40 percent (the highest in Europe bar Malta and France) to 29 percent by 2020. In September 2016, business executives listed tax rates as the most problematic factor for doing business in Belgium.

    Other potential cities for relocation include:

    Amsterdam on average has a well-educated population and good financial supervision. In 2016, Dutch financial regulation achieved almost the same score as Luxembourg when it came to the regulation of securities exchanges. Financial trading companies, such as Tradeweb and Radix Trading, already applied for licenses, together with Royal Bank of Scotland and Mitsubishi UFJ Financial Group. Despite that, the city struggles with the high cap Dutch law put on bonus schemes for bankers of 20 percent of their annual salary (compared to 100 percent for the rest of Europe).
    Madrid has an established banking sector with Banco Santander and BBVA. The country is also showing signs of recovery from the financial crisis, with the share of non-performing loans in the country's portfolio reaching a value of approximately six percent in 2016.
    Stockholm produces many technology startups and is home to iZettle and Klarna, two payment businesses. The Swedish attitude towards an economic and monetary union with the euro, however, was negative in 2016.

    3) Why would financial companies move away from the London City? With expansion to, for example, Frankfurt, Dublin or Luxembourg, London-based financial services companies maintain their access to the single market, as most financial companies assume that the UK is going to lose its financial passport rights after Brexit, with no special financial services deal and no transition period. These passporting rules allow businesses to sell services across the European Union or European Economic Area (EEA, the EU together with Iceland, Liechtenstein and Norway) from anywhere within it, as long as they are based in (and regulated by) one country. Not signing a new trade agreement, which includes a solution for this passport-construction, was perceived as a bad outcome for Britain. In addition, new EU laws that come in effect from January 2018 require investment companies and trading platforms who are active on the European Union to have an office on the European mainland. Banks need at least 12 months to establish full-scale operations inside the EU, essentially meaning that in March 2018 at the latest, not March 2019 - the date of the actual Brexit -, they would have to start moving people if no adequate deal has been reached yet.

    The future landscape of European banking and insurance remains uncertain and is not shaped by location decisions alone. The EU, for instance, has to take an approach to financial market infrastructure and to help insure smooth functioning of banking and financial markets when the deadline of the Brexit negotiations arrives in March 2019. Now that London financial services come calling to an increasingly fragmented market in Europe, more cooperation seems required to ensure everything will go well on 'Day 1' of the post-Brexit world.

    This text provides general information. Statista assumes no liability for the information given being complete or correct. Due to varying update cycles, statistics can display more up-to-date data than referenced in the text.

    Published by Statista Research Department, Jun 7, 2022

    See Also
    Who owns the Bank of England?Brexit and investment banks | Global law firm | Norton Rose FulbrightMoving abroadSurvey: The grave consequences of Brexit - KPMG Germany

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    Topic: Brexit relocation of London banks and finance to Europe (3)

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    Now, let's dive into the information related to the concepts mentioned in the provided article. The article discusses the potential consequences of Brexit for the London financial sector and explores the potential locations for London finance to relocate to. Here's a breakdown of the key concepts mentioned:

    1. Brexit Consequences for London City:

    2. Potential Locations for Relocation:

    3. Reasons Behind Relocation:

    The article emphasizes the uncertainty in the future landscape of European banking and insurance, with the need for more cooperation to ensure a smooth transition post-Brexit.

    If you have specific questions or need further insights into any particular aspect, feel free to ask.

    Topic: Brexit relocation of London banks and finance to Europe (2024)

    FAQs

    What is the impact of Brexit on the financial sector? ›

    A key point of the referendum was for the UK to become less reliant on EU trade and open up trading alliances with new countries. However, between 2018 and 2021, there was an 18% decrease in financial services exports to the EU, with only a 4% increase in exports to non-EU countries to offset it.

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    How has Brexit affected the city of London? ›

    GLA Economics has used a synthetic control methodology to measure the impact of Brexit-related effects on London's economy. The analysis finds that London's Gross Value Added (GVA) was 6.2% (or £32 billion) lower in 2019 than it would have been had the UK voted to remain in the EU back in 2016.

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    Why bankers leaving London? ›

    With the UK's withdrawal from the European Union, financial institutions have had to reassess their operations and establish new bases within the EU to maintain access to the single market. Paris, as a major financial hub in Europe, has emerged as a prime destination for many banks seeking to establish their EU hubs.

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    What is the Brexit summary? ›

    Brexit (/ˈbrɛksɪt, ˈbrɛɡzɪt/; portmanteau of "British exit") was the withdrawal of the United Kingdom (UK) from the European Union (EU). Following a referendum on 23 June 2016, Brexit officially took place at 23:00 GMT on 31 January 2020 (00:00 1 February 2020 CET).

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    Will London still be financial capital after Brexit? ›

    The behaviour of financial and business services translates into the position of financial centres after Brexit. IP_22, from a national regulator, emphatically states that “…that the City of London will continue to be a financial centre is clear because, first of all, it was the only financial centre in Europe”.

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    Is Brexit a financial crisis? ›

    The economic effects of Brexit were a major area of debate during and after the referendum on UK membership of the European Union. The majority of economists believe that Brexit has harmed the UK's economy and reduced its real per capita income in the long term, and the referendum itself damaged the economy.

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    Has London lost its financial status? ›

    The 33rd edition of the Global Financial Centres Index (GFCI 33) was published on 23 March 2023. The report shows that London has lost its sole lead as the world's top global financial centre, according to research by the City of London that will add to concerns over the competitiveness of the Square Mile.

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    Why did London become such an important city in Europe? ›

    London, “the City,” developed as a center of trade, commerce, and banking. Southwark, “the Borough,” became known for its monasteries, hospitals, inns, fairs, pleasure houses, and the great theatres of Elizabethan London—the Rose (1587), the Swan (1595), and the world-famous Globe (1599).

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    How much has Brexit cost? ›

    Bloomberg found that Brexit is costing the UK economy £100 billion a year.

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    In 2023, America saw its highest amount of bank closings since the 2008 recession. The increase in mobile banking use, inflation and interest rates, and real-estate struggles all contributed to why 2023 experienced so many banks shutting their doors.

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    Who broke the bank of London? ›

    In September 1992, George Soros orchestrated a historic trade, famously dubbed "The man who broke the Bank of England," marking a pivotal moment in financial history.

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    How much do London bankers get paid? ›

    The average salary for Banker is £60,220 per year in the London. The average additional cash compensation for a Banker in the London is £14,998, with a range from £4,339 - £51,842. Salaries estimates are based on 99 salaries submitted anonymously to Glassdoor by Banker employees in London.

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    What was the real reason for Brexit? ›

    Factors included sovereignty, immigration, the economy and anti-establishment politics, amongst various other influences. The result of the referendum was that 51.8% of the votes were in favour of leaving the European Union.

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    Why Brexit is important? ›

    Leaving the EU has meant that the UK has not had to contribute to the significant new liabilities arising from the EU's Covid response including, for the first time, the EU's borrowing of up to €750 billion between 2021–24.

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    What are the downsides of Brexit? ›

    Drawbacks of Brexit

    As an entity, the EU exerts stronger bargaining power as it is the largest economy as a group. Therefore, by leaving, the UK would lose negotiating power and free trade with other European countries. As the UK tries to recreate trade deals with other countries, they may get less favorable results.

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    What is the impact of Brexit on UK financial institutions? ›

    Such hard Brexit will mean that UK-based financial companies will lose their “passporting” rights to operate in the rest of the EU. This will take some adjustment, especially for smaller players. Larger firms, however, are likely to be able to reorganise their business, albeit at some cost.

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    What does Brexit mean for financial services? ›

    UK's exit from the EU will transform a financial services firm's relationship with that customer from “within border” to “cross border”. This in turn makes the future relationship dependent on the terms on which the UK exits the EU in a way that is not the case today.

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    How Brexit could affect UK banking sector? ›

    UK banks holding branches in the EU may have to convert those entities to subsidiaries, a costly process, in order to continue providing financial services. As the UK becomes a third country, there may be a need to repaper contracts to reflect the UK's new legal status.

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    How did Brexit affect the UK stock market? ›

    They traded at a premium to global stocks. But as investors shunned the UK market in ever greater numbers after Brexit, that valuable premium disappeared. More sellers than buyers has driven down the price of shares over the past few years.

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