Around half of senior finance executives polled by Big Four accountancy EY expected Brexit to drive more jobs out of London, despite prime minister Boris Johnson’s claims that the City remains an attractive destination for bankers to continue doing business.
EY asked 43 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 European Union as a result of the UK’s split from the bloc. Just under half, or 48%, said such moves were likely, including 8% who said they expected their firms to shift “a large extent” of people or assets in the foreseeable future.
It comes just days after Johnson said the City’s “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 backlash 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 the UK’s 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 told FN that navigating the regulatory minefield of Brexit was contributing to mounting stress levels in the sector, and threatening to change the make-up of City giants’ compliance functions.
Four months on and EY’s October poll showed that not much has changed. More than two thirds, or 68%, of 29 respondents to the poll 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 inappropriate ‘brass plating’ by firms from outside the EU. ‘Brass plating’ refers to instances where an EU individual or address is involved in communications to the 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.
European regulators also put pressure on UK-based banks in mid-2020 to relocate staff to their European Brexit hubs before the spread of the coronavirus derailed such planning.
Regardless, a quarter, or 25% of 36 senior finance execs polled by EY said that planned Brexit-related movement from the UK to the EU had been postponed by the Covid-19 pandemic.
Andrew Pilgrim, UK financial services government leader at EY, 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.
“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,” he said.
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