Drift of jobs to EU slows as talks remain ‘challenging’
Sue Dawe: firms were well-prepared
Fears of a large scale shift of financial services jobs and assets from the UK to the EU appear to have subsided.
While some movement is expected to continue, a new study reveals that it has slowed to a trickle as firms were well-prepared for Brexit.
Since the 2016 referendum, 43% of financial services firms have moved 7,500 jobs across the Channel, according to EY Financial Services Brexit Tracker. But since October that figure has increased by just 100.
Sue Dawe, managing partner for financial services at EY Scotland, said: “After the major hurdle of standing up new EU hubs, the days of significant swathes of asset and job relocation announcements appear to have passed.
“Firms in both the UK and the EU continue to deal with the challenges well, and the fact that no major service disruption occurred on 1 January 2021 [the first day after the end of the transition period] demonstrated just how well prepared the financial services sector was and will likely be replaced by the slower yet ongoing movement of people and assets to Europe for compliance purposes.”
She added that “specific policy work to align the UK and its closest trading partner remains crucial and will be mutually beneficial.”
Looking ahead, the UK, and Scotland’s place within it, as a leading global financial centre will be as focused on building relationships and competing with markets beyond European borders as it will be on building its new relationship with the EU, she said.
“There is already much activity underway as the UK redefines its future. As all markets look ahead, the trade agreements to come will lay the foundations for a new era of global financial services.”
Omar Ali, EMEIA financial services managing partner for client services at EY, added: “UK and EU Firms are now awaiting the detail of the upcoming Memorandum of Understanding on Financial Services and will shortly face into a new round of Brexit discussions on the framework that will ultimately define the future relationship.
“The challenges remain significant, and, as recent headlines evidence, the push and pull of markets across Europe for business historically led from the UK continues.
“Such ongoing uncertainty poses the risk of fragmented markets, which is inefficient and costly for all financial services users and potentially damaging to the global competitiveness of both the UK and EU.
“Fragmentation of European financial services will serve to only benefit the US and Asia. But these challenges can be overcome if the right areas are prioritised.
“Although passporting and equivalence debates command the headlines, there are arguably far more complex matters involving data, capital, skilled talent and frictional costs, that need to be settled.”
Migration of UK assets to Europe reaches almost £1.3trn
Twenty-four of the largest financial services firms (ten banks, nine insurance providers, and five wealth and asset managers) have so far transferred or announced an intention to transfer assets out of the UK to Europe due to Brexit.
Not all firms have publicly declared the value of the assets that could be transferred but, of those that have, EY’s Financial Services Brexit Tracker estimates the figure to be almost £1.3 trillion, up from £1.2 trillion in October 2020.
Firms stress the need for cooperative UK-EU framework as Brexit continues to hit profits.
The negative financial impact of leaving the EU is still being felt by some in the UK financial services sector.
Over a quarter (26%, equating to 57 out of 222) of firms have publicly stated that Brexit is impacting or will negatively impact their business, up from 49 in January 2020.
Since late December 2020 and in the two months since the Brexit deal, ten financial services firms – made up from some of the largest retail and investment banks and wealth and asset managers operating in the UK – have publicly urged the UK Government and regulators to ensure that the UK sector remains competitive and open for business.
Frankfurt: popular location
Dublin remains the most popular destination for staff relocations and new European hubs or offices, with 36 firms saying they are considering or have confirmed relocating UK operations and/or staff to the city.
Luxembourg is the second most popular destination and has attracted 29 companies in total; 14 are wealth and asset managers and six are universal banks, investment banks or brokerages.
Frankfurt has attracted 23 companies in total, 19 of which are universal banks, investment banks or brokerages.
Twenty Firms say they are considering or have confirmed relocating operations and/or staff to Paris, 14 of which are universal banks, investment banks or brokerages. Other named locations include Madrid (8), Amsterdam (8), Brussels (6) and Milan (5).