UK expects to lose 5,000 City jobs by Brexit deadline day

Following a warning from the Bank of England that thousands of jobs could move to the continent by Brexit, the UK Government has responded by confirming some 5,000 roles could exit the financial services sector alone. With the deadline for negotiations fast approaching, and a potential deal having been de-railed by the Government’s junior coalition partner, an exodus is likely to be on the cards by March 2019.

In the protracted fallout of 2016’s referendum result, a growing number of groups have been predicted to begin leaving the UK in anticipation of a hard Brexit which will most likely be hostile to their needs. These have included migrant workers, NHS staff, prospective students, graduates, manufacturers and many more. Thanks to their financial clout, however, the most prominent aspect of this forecast “Brexodus” has been the financial service sector.

In autumn 2017, the Bank of England predicted that 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 hinted that many firms currently based in London are likely to relocate to mainland Europe, and to an extent this has commenced. EY’s Brexit Tracker revealed that since the day of the infamous referendum result, 21 financial services firms have confirmed that they will move some or all of their UK operations to Ireland, surprisingly making Dublin the most popular post-Brexit location, exceeding the number of institutions headed for Frankfurt (12), Luxembourg (11) and Paris (8).

Now, a year on from the Bank of England’s first startling prediction, the central bank of the United Kingdom has further warned as many as 5,000 roles could head for mainland Europe before the culmination of the Brexit process. After triggering Article 50 to end its membership of the European Union in late March 2017, the UK is set to secede from the bloc on March 29th at 23:00 GMT. At present, this looks destined to occur without a deal in place. While the EU has worked to accommodate the UK, a disagreement over the border between Northern Ireland and the Republic of Ireland has seen the Conservative Party’s governmental bed-fellows of the DUP block any deal, and threaten to trigger an election.

With no end to the current impasse on the horizon, the UK Government has responded to the Bank of England’s most recent alert by admitting that it too expects thousands of financial services jobs to have moved to the continent by the time of the UK's exit. While City Minister John Glen said that the situation was "stable" as far as job movements were concerned, he agreed with Threadneedle Street that 5,000 City jobs would likely have left British shores by March.

“Pretty impossible”

Addressing a committee in the House of Lords, Glen added he would do all he could to ensure that the City of London remained a major financial centre, remarking, "My sole objective in respect of the City is to ensure as much continuation as possible in respect of economic value able to be generated by the City.”

While he "fully expects" that Britain and the EU will agree on a deal that would introduce a transition period from next March to avoid a disorderly Brexit, Glenn admitted, however, that he was unsure of what the future held, as Britain edges ever closer to a cliff-edge, No Deal exit. He confessed, “We have not seen wholesale moves of large institutions to other cities in continental EU… I don't have a crystal ball... [Job losses] will be so contingent on the nature of that no-deal."

Britain's financial sector generates more than £70 billion in tax revenues, with the EU its biggest single export market. The Treasury has not calculated how much tax from financial services institutions will be lost, however. According to Glen, this is because it would be “pretty impossible” to perform meaningful calculations on the matter, given the level of uncertainty as to the extent of any such exodus. Instead, he commented that the Government was focusing on trying to secure a bilateral agreement with the EU to get regulatory equivalence between the UK and the bloc, in which the EU would grant market access to foreign banks and insurers if their home rules are aligned enough with those in force in the bloc.

Commenting on the situation, Sophie Van Oosterom, Chief Investment Officer for commercial real estate and investment consultancy CBRE, said that while many firms are yet to make firm commitments to move staff, they are negotiating options on space in Amsterdam, Dublin, Frankfurt and Paris that will allow them to grow quickly in the event of a hard Brexit, typically with space for between 20 and 40 employees.

Explaining this contingency planning further, she elaborated, "So if there is a soft Brexit, they will stay put and if something dramatic happens, they can flick the switch. They are taking optional space that doesn't cost them too much, but gives them the ability to grow quickly."