The Bank of England is said to view 75,000 financial services jobs lost as a result of Brexit as a “reasonable scenario.” Miles Celic, chief executive of industry advocacy group TheCityUK, has told Sputnik the numbers are consistent with his organization’s own research – and would translate to many billions in tax revenue for the UK.
The Bank of England (BoE) is forecasting the UK could lose up to 75,000 financial services jobs in the years following its secession from the European Union in 2019, the BBC reported October 31.
The numbers are described as a “reasonable scenario,” particularly if no specific UK-EU financial services deal is struck, and follows suggestions by BoE Deputy Governor, Sam Woods, to Reuters earlier in October that a figure of 10,000 losses in the sector was a reasonable estimate of the initial impact of leaving the EU.
While Woods expected London would continue to be one of the world’s largest financial centers in years to come, and the City may not lose its preeminent status as the world’s financial hub, he acknowledged the longer-term impact of Brexit on financial services jobs was far from certain, and contingent on the deal the UK reached with the EU.
“The number of jobs the [BoE] suggests are at risk are consistent with analysis we commissioned last year, [which] showed if the UK’s access to the EU’s market is defined by [World Trade Organization] rules, an estimated 35,000 jobs could be at risk, with up to 75,000 across the wider financial and related professional services ecosystem, along with up to £10 billion [US$13.2 billion) in tax revenue and £38 billion [US$50 billion] in revenue,” Miles Celic, chief executive of TheCityUK, told Sputnik.
Other job loss forecasts have ranged from around 30,000, estimated by Brussels-based Bruegel research group in February, to as much as 232,000 by London Stock Exchange chief executive Xavier Rolet in January.
Presently, London dominates global currency trading, and is by far and away Europe’s primary finance hub.
Overall, finance employs over a million people across the UK, and official data released October 31 showed the industry generated a record US$81 billion of exports in 2016.
Once Britain leaves the EU however, it will be harder for UK firms to sell services across Europe due to a loss of passporting rights.
Some financial institutions have already started to downsize their operations in the UK, moving entire offices to the continent, or expanding existing operations there.
Frankfurt — Germany’s financial and business center — has established itself as the key alternative headquarters for banks and other financial institutions fleeing the UK.
Seven of the world’s 12 largest investment banks, including Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan and UBS, have indicated they could move their European operations there.
Other firms wait with baited breath to see whether Britain and the EU agree a transitional arrangement to smooth Brexit.
Status-Quo Transitional Deal ASAP
“The most urgent priority remains agreeing a time-bound Brexit transition period. EU and UK negotiators must discuss and agree a status quo transitional deal as soon as possible if it’s to hold any real value for our industry. Once businesses start moving, there is no reverse gear. It’s simply not efficient or economically viable to move operations twice,” Mr. Celic told Sputnik.
Mr. Celic’ comments echo those of Andrew Bailey, chief executive of the UK Financial Conduct Authority, who has said firms would be compelled to make “irreversible” decisions if no deal was struck by the end of 2017, or the start of 2018 at the latest.
“It’s vital the EU and the UK avoid a no deal scenario. This outcome will see few winners, with UK and EU customers likely to bear the brunt in the form of reduced choice and cost increases. While some of the UK’s business activity may fragment and scatter across Europe, most is likely to go to other major international financial centres such as New York or Singapore, or simply stop altogether,” Mr. Celic concluded.