City firms’ £1trillion Brexit breakaway
Bosses say financial sector is ‘forgotten child’ in talks
CITY firms have shifted more than £ 1trillion of assets and thousands of jobs to Europe amid concerns over Brexit.
It comes as business leaders claim the country’s financial services sector is the ‘forgotten child’ in trade talks.
Banks, insurance firms and fund managers have been scrambling to protect their businesses before the Brexit transition period ends on December 31.
From next year financial firms based in Britain will lose the ‘passporting rights’ that have enabled them to freely sell funds, debt, advice and insurance to clients across the EU.
City bosses had hoped that ministers would be able to thrash out a replacement deal with EU officials to enable them to trade on a similar basis after Brexit. But business leaders have become increasingly frustrated over the lack of progress and they claim that the Government appears to be more focused on smaller industries such as fishing.
While painstaking negotiations have continued in Brussels, big City firms have been hedging their bets by shifting assets from London to the continent and setting up subsidiaries in rival financial centres such as Frankfurt, Paris and Dublin.
Wall Street giant JP Morgan has already switched £180billion – or 7 per cent of its global assets to Frankfurt. And Barclays is now the biggest bank in Ireland after switching £150billion to Dublin.
Other big names – including Bank of America, Goldman Sachs and Morgan Stanley – have already prepared European hubs and shifted assets out of the UK to Ireland, Germany, and France.
According to accountancy firm EY, assets worth £1.2trillion have been switched from London to continental Europe since the Brexit vote in June 2016.
Since the referendum, 88 of the 222 firms it has tracked have earmarked at least one location in Europe where they plan to move staff. Frankfurt has proved the most popular destination, followed by Paris.
EY said preparations have been stepped up in recent weeks as prosit pects fade for a financial services deal. Omar Ali from EY said: ‘With the prospect of a deal between the UK and EU still hanging in the balance, many firms still remain in a “wait and see” mode.
‘The pre-trade agreement, set to be finalised at the end of October, means we could see a flurry of further staff and operational announcements in the weeks that follow.’
Business leaders have become exasperated by the apparent failure of officials on either side of the negotiating table to prioritise the financial services sector in Brexit talks. Catherine McGuinness from the City of London Corporation said was ‘extraordinary’ that ministers and EU officials appear to be spending so much time on fishing rights rather than our financial services industry.
Bemoaning that Britain’s wider services sector ‘does seem to be the forgotten child’ despite accounting for 80 per cent of the economy, she told the Financial Times: ‘We don’t want to be the neglected child of an acrimonious divorce, carrying its pyjamas between the parents.’
The financial sector employs more than 1million people in the UK and is the country’s biggest exporting industry. In contrast, Britain’s fishing accounts for just 0.1 per cent of GDP and employs around 24,000. Allie Renison, of the Institute of Directors, said: ‘Financial services really need to start being treated in negotiations for what they are: a huge contributor to the UK economy.’
Business leaders have stressed there is no need to panic about London losing its status as Europe’s pre-eminent financial centre.
This is because the 7,500 jobs which have relocated to the continent so far account for just a small fraction of the 1.1million people employed in the sector.
David Buik from challenger stock exchange Aquis said: ‘We will lose business but I think we will find that after the dust settles the financial centres of the world will still be New York, London and Tokyo.’
‘Huge contributor to the economy’