Bank of England echoes warning of 75,000 job financial services 'Brexodus'
The Bank of England has predicted Britain stands to lose as many as 75,000 financial services jobs following the culmination of Brexit in 2019. In an alarming forecast, the institution responsible for the monetary and financial stability of the UK suggested many firms currently based in London are likely to relocate to mainland Europe.
The central bank of the United Kingdom, the Bank of England (BoE) is the model on which most modern central banks have since been based, following its establishment in 1694. The world’s second oldest central bank in operation today, after the Sveriges Riksbank, has suggested that a huge number of financial services jobs could be about to leave British soil, following the UK’s divorce from the EU. Reports in the British press state that the BoE predicts up to 75,000 jobs in the sector could be heading to cities in the 27 surviving EU states. While Paris, Dublin, Brussels and Madrid are thought to be likely beneficiaries of this, Frankfurt is largely seen as the most popular destination for jobs leaving the UK, with professional services firms such as Raymond James and Projective relocating to the German city in anticipation of this.
The troubling forecast comes on the heels of a previous study carried out by the industry's main lobby group, TheCityUK, which also suggested that the UK financial sector could shrink to the tune of 75,000 positions post-Brexit. Consulting firm Oliver Wyman, who partnered TheCityUK in that research, later predicted that around 40,000 banking jobs could be among that figure.
Due to the huge financial stakes at play, then, the consulting industry has been keen to advise the UK and EU governments on ways to maintain a healthy financial services sector after the conclusion of negotiations in Brussels. According to a recent report from Strategy&, PwC and TheCityUK, financial professional services and law firms, essential parts of London’s financial ecosystem, could contribute an extra £16 billion in taxes by 2025, if they are not decimated following Brexit. The European consulting industry meanwhile issued a joint call for all governments across the EU to support open trade and easy movement of consultants between the EU and the UK after Brexit. The leaders of thirteen national consulting associations, including the MCA, published the collective manifesto at a special meeting of the industry’s European Federation on October 16th.
The BoE’s newest projections on the matter were initially reported by the UK’s state broadcaster. The BBC’s economics editor Kamal Ahmed stated, “I understand that senior figures at the Bank are using the number as a ‘reasonable scenario’, particularly if there is no specific UK-EU financial services deal,” before adding that the BoE thought the figure could vary depending on the terms on which Britain left the EU, while 75,000 was at the upper end of projections provided by other groups.
Economic slowdown
Threadneedle Street is currently assessing British-based financial services firms’ contingency plans to minimise disruption after Brexit. With the economy remaining sluggish, meanwhile, the BoE is reportedly poised to raise interest rates this for the first time in more than a decade, raising the cost of borrowing for British households already hurt by an earnings squeeze. The initial cut in interest rates from 0.5% to 0.25% was an emergency action taken as a precaution following the EU referendum, as the Bank sought to avert a recession. While a slump did not materialise, the British economy appears in worse health than most other major countries, with potential to be blown further off course by faltering talks to leave the EU. As further stagnation in wages have decreased consumer spending power, increasing reliance on borrowing once more, the measures may have further implications for the UK’s growth in the long-run.
Public finances are meanwhile expected to take a major hit in the coming Autumn Budget, following the announcement by the Office for Budget Responsibility (OBR) that its forecasts for growth had been too optimistic, while the International Monetary Fund also readjusted its projections for the UK economy, due to "weaker-than-expected activity" in the first three months of the year. The global financial institution’s forecast that the UK economy would grow by 1.7%, compared to a previously anticipated 2%, all but wiped out a £26 billion budgetary buffer put in place by Chancellor of the Exchequer Philip Hammond last year, in order to insure a smooth Brexit transition.
In an MCA report, the management consulting sector – which is often viewed as a weather vane for coming trends in the economy as a whole – was seen to have slowed significantly, with its 4.75% expansion overshadowed by more impressive growth in France (11%) and Germany (8.3%) in particular. This could indicate that businesses are broadly experiencing a slowing of headline growth, and are deferring growth-supporting projects and cutting back on discretionary spend as a precautionary measure. This looks increasingly likely to be the case, suggesting further financial turbulence lies ahead, as the UK economy as a whole is currently growing at half the rate recorded in the US for the year to September, at 1.5%, while growth is expected to trail Italy, France and Germany next year.
