Predictions of the impact of Brexit on British financial firms are firming up with the Bank of England now believing there could be up to 75,000 job losses n financial services depending on the sort of departure Britain has from the EU.
Banking institutions, hedge funds and insurance groups have been unwilling or unable to give precise numbers of job losses that will flow from Brexit and most estimates have been based on speculation.
But senior employees at the Bank of England have begun using the figure of 75,000 job losses as “a reasonable scenario”, particularly if Brexit negotiations do not reach a specific financial services deal, according to the BBC.
Dr Victoria Bateman, a lecturer in economics at Cambridge University, confirmed that she too believed 75,000 jobs could be lost. “The UK’s role as a global financial capital has a long history that could help insulate it,” she said.
“However, history shows how quickly leadership can change – especially once the snowball effects that facilitate success start to go into reverse. Until now, the City has managed to hold on. The question is whether it can continue to do so this time. And if it can’t, I expect those jobs to go.”
David Davis, the Brexit Secretary, told a House of Lords EU committee just this week that Europe’s treatment of financial services “could be make or break” in the Brexit talks.
Withholding Evidence
Davis dismissed claims put to him by peers that the so-called Brexit divorce bill would be “make or break” for the talks, saying instead there were a number of other “fundamental issues, including our future regulatory relationships and the position of financial services”, that could derail talks.
The Government has not released a definitive analysis of likely financial services job losses, although it is thought to be among the “effects of Brexit” studies carried out by the Government but so far withheld from the public.
The Bank of England could still change its “reasonable scenario” projection of job losses depending on the UK’s post-Brexit trading deal but the bank still expects substantial job losses under any scenario.
The central bank has asked individual banking groups and other financial institutions such as hedge funds to provide it with contingency plans in the event of Britain trading with the EU under World Trade Organisation rules, a situation widely referred to as a “hard Brexit.”
Counting Job Losses
That would mean banks in the UK losing their valuable “passporting” rights to operate across European countries.
The EU could also impose other “location specific” regulations, for instance dictating where trading in trillions of pounds worth of euro-denominated financial insurance products has to be based.
Such regulatiions would force trading jobs to be moved to locations such as Paris, Frankfurt, Luxemburg or Dublin, cities which have already been heavily gearing up for an influx of the British jobs.
There have been a number of studies on the potential impact of Brexit on jobs there is a wide acceptance that 10,000 jobs would be gone on “day one” of Brexit if there is no deal. The Brussels-based think tank, Bruegel, says that over time 30,000 jobs could move to the continent or be lost as London’s financial sector shrinks.
Xavier Rolet, the chief executive of the London Stock Exchange, has suggested that more 200,000 jobs could go. The Bank of England believes that is too high, and its scenario over the next three-to-five years is much closer to a 2016 study by Oliver Wyman, a management consultancy which has often been quoted by banking lobby groups assessing the impact of Brexit.
That report suggested 65,000 to 75,000 job losses and that is the estimate that the Bank of England feels is more accurate.
by Bob Graham
The post Brexit: Do Finance Jobs Face a Catastrophe? appeared first on Felix Magazine.
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