Around half of senior finance executives polled by Big Four accountancy firm EY expected Brexit to drive more jobs out of London, despite Prime Minister Boris Johnson’s claims that London’s financial district (known as the ‘City’) remains an attractive destination for bankers to continue doing business.
EY asked 23 bosses at London’s banks, asset managers and insurance firms in mid-October if they expected their firms to shift more people or assets to the EU as a result of the UK’s split from the bloc. Just under half – 48 per cent – said such moves were likely, including 8 per cent who said they expected their firms to shift “a large extent” of people or assets soon.
This is a matter of some concern at a time when the UK is facing staff shortage.
It comes just days after Johnson said the “time zone, the language, the rule of law, the deep pools of liquidity in the City of London, the attractions of having some of the best universities in the world” were keeping banks focused on investing in their UK operations.
That followed Johnson’s efforts to quell business back lash against his ruling Conservative Party amid a mounting labour shortage and rising coronavirus cases, by praising bankers “unique pools of liquidity” in helping the UK to develop vaccines, which in turn bolstered its economic recovery after a series of lockdowns.
However, the UK remains locked in negotiations with the EU over the regulatory frameworks within which its financial centres will operate post Brexit, a delay that has forced banks to increase hiring on the continent.
In June, compliance industry insiders said that navigating the regulatory minefield of Brexit was contributing to mounting levels of stress in the sector, and threatening to change the make up of City’s giants’ compliance functions.
EY’s October poll showed that not much has changed. More than two thirds, or 68 per cent, said that “the cost and burden of evolving UK/EU regulation” was “the single biggest cross-border challenge” facing their firm currently.
Around 7,600 jobs had moved out of the UK to continental Europe in compliance with Brexit, EY said in March, as City firms sought to meet European regulators’ requirements for companies doing business in the EU after Brexit to have a substantial presence in the region.
The European Securities and Markets Authority, the EU’s top markets watchdog, has issued several notes since the 2016 Brexit vote warning against “brass plating” – where an EU individual or address is involved in communications to a client to give the impression that it is the firm’s authorised European branch that is conducting the business, not one from outside the bloc that would not be allowed to.
EU regulators also put pressure on UK-based banks in mid-2020 to relocate staff to their European Brexit hub before the spread of the coronavirus derailed such planning.
Regardless, 25 per cent of 36 senior finance executives polled by EY said that planned Brexit-related movement from the UK to the EU had been postponed by the Covid-19 pandemic.
UK financial services government leader at EY, Andrew Pilgrim, said that “the main bulk of people and operational moves to the continent was achieved well in advance of the 2020 Brexit deal” but “the market expects momentum around the movement of people and business to pick back up” as countries across Europe emerge from the pandemic.”
He added: “Although we have come a long way since 2016, for many large financial services firms, Brexit is not yet a word to be confined to the history books.”
(The writer is our foreign correspondent based in the UK)
Oman Observer is now on the WhatsApp channel. Click here
