Brexit has caused very few finance jobs to leave London

SPEAKING TO THE Treasury select committee in January 2017, Xavier Rolet, then chief executive of the London Stock Exchange, warned that a sufficiently deep divorce could cost Britain 232,000 financial services jobs. Such gloom was common, as was the expectation that Britain’s loss would be others’ gain. Frankfurt and Paris got ready to welcome hordes of bankers ejected from London.

Four years on, the version of Brexit for which the government opted has been harder than that in most City bosses’ nightmares. An industry that contributes 7% of Britain’s GDP and 11% of its taxes was excluded from the trade deal signed with the EU. Almost immediately, Amsterdam’s stock exchanges unseated London’s as the primary venues for European share trading. Over the course of January, London’s derivative-trading platforms lost three-quarters of their euro volumes to Amsterdam and New York. In the ensuing months, hopes that the EU would grant Britain “equivalence” status for various financial activities faded. British firms are left with two financial functions—settlement and clearing—that they can perform for EU clients, out of around 40. And these exemptions are temporary, expiring in June 2021 and June 2022 respectively.

So far, however, the jobs exodus has been tiny. According to EY, a professional-services firm, financial-services companies have moved 7,600 roles from Britain to the EU since 2016. New Financial, a think-tank, puts the figure at 7,400. EY looked at 222 firms, New Financial 441. That compares with the 190,000 financial-services jobs in the City, and the 67,000 in Canary Wharf, and 1.1m in the sector as a whole. Why have so few gone?

Start with what the changes to Europe’s financial plumbing actually involve. The movement of share-dealing venues evokes an image of open-outcry traders vacating City exchange halls en masse and heading for the Netherlands. In reality, London’s exchanges and Amsterdam’s bourses have long been online platforms. The computer mainframes hosting transactions may now be outside Utrecht rather than in the Home Counties, but traders tapping at keyboards do not need to move.

Meanwhile, banks are mostly moving as few jobs as they can to satisfy regulators. That includes some senior staff, salespeople, traders, risk managers and compliance. But of the ten banks asked by The Economist about their plans, none said they intended to shift people in numbers greater than the low hundreds. JP Morgan, whose parent company’s chief executive warned in 2016 that Brexit could cause the bank to cut 4,000 of its British jobs, will have moved fewer than 400 by the end of 2021. Morgan Stanley, which spent the aftermath of the referendum denying reports that it had started moving 2,000 staff to Dublin and Frankfurt, has moved 150.

In the run-up to Brexit, both Paris and Frankfurt made a play for London’s business, but they do not have its attractions as a place to live. In a survey by the Boston Consulting Group and The Network, a group of online recruiters, published in March, respondents from 190 countries named London as the place they were keenest to move to. Convincing lots of well-heeled bankers to abandon the city’s cultural life—and, more important, posh schools—turns out to be a difficult task.

The competition also lacks critical mass. The north of England exports more financial services than France does, while Frankfurt’s whole financial sector employs fewer workers than London’s fintech companies. And while the French and German governments are keen to attract business, the EU’s more modest aim is to reduce its reliance on Britain, and to deepen its own “capital-markets union”. As a result, firms are sceptical that the bloc will be a driver of future growth.

That is not to say that it will be plain sailing for the City. A spat over clearing is likely when its temporary-equivalence designation expires next year. A question-mark also hovers over British asset managers’ permission to oversee EU-domiciled investment funds. But waves of job losses are not yet on the horizon.■

For more coverage of matters relating to Brexit, visit our Brexit hub