Brexit could prove trigger for finance jobs reshuffle
No one quite knows what the UK’s vote to leave the EU will mean for London as a financial centre, but rival cities across the continent are readying themselves for the fallout and the opportunities that will surely arise. But the biggest winner could well be New York
The financial world likes to talk positively about the effect of political events, wary that any hesitation may fuel bear-market trends and hurt jobs and earnings. Despite most in London’s financial community being opposed to Brexit, few are now willing to break the ranks of the new euro-sceptic order.
But an acceptance is taking root that jobs will be lost in investment banking, derivatives and asset management, with estimates varying between 10,000 and 60,000. Strategists at the City of London are admitting parts of institutions – not entire banks – will settle elsewhere. And New York, home of president Donald Trump, trying his best to undermine a united Europe and promote long-distance cheerleading for Brexit, will be the likely beneficiary of business lost from London.
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The infrastructure is clearly there, not just in the exchanges and trading hubs of Manhattan, but also at the outsourcing centres across the river in New Jersey. It will not be too much of a task for New York to absorb 20,000 or so new staff. Despite their recent talk of fast expansion, Frankfurt, Paris and Amsterdam will struggle to become major financial centres, believe consultants at Oliver Wyman.
Officials from Dublin and Luxembourg have also been regular visitors to London. Both are likely to gain modestly from the current uncertainty. Sure, there will be new players setting up fund ranges to market freely across the EU and beyond. But even the promotional bodies in these rival centres admit incomers are just as likely to come from Asia, especially Japan, North and Latin America, rather than disgruntled refugees from London.
Further south, Malta has enjoyed a huge number of enquiries, especially in the insurance sector. Smaller investment boutiques are also expecting a warm welcome, but there is a lack of infrastructure and financial ecosystem in Malta, with a sparsity of well-known custody banks presenting an obstacle the authorities have long been keen to overcome.
There is a also a nervousness in some jurisdictions which are more intimately linked to the City of London. There is a danger that the cloud of uncertainty which has settled over the financial industries of the Channel Islands might prove to be even more unpredictable than the murky weather which often plagues Jersey and Guernsey.
In Jersey, in particular, the authorities have worked hard to line up their regulatory regime with that of the EU, to make alternative investments registered on the island freely available across Europe. But now all of that work has been called into question, with these regulatory initiatives on hold.
Immigration too, is a huge question for these fledgling financial centres, which have long relied on an influx of foreign labour to feed any surge of demand for services. This has not been helped by local elements on both islands sometimes opposed to the financial centres’ development, fuelled in the case of Jersey by allegations of funds apparently squandered on business class plane tickets as part of a trip to generate business.
Their base case now lies in wealth management, proving asset structures for wealthy families affected by unstable, politically volatile regimes. That is a business likely to boom. One hope is that banks can base increasing numbers of staff on these islands.
Fledgling centres such as Barcelona and Berlin also have their backers, but the real action may happen further East. Warsaw is singled out by Oliver Wyman as an excellent home for wealth and asset managers looking to outsource back office financial functions. The city boasts a substantial population of willing, financially literate English-speaking workers. Major institutions have enjoyed some success here. The likes of Citi, UBS and Credit Suisse have outsourced thousands of jobs to Poland.
Assets and jobs are clearly on the move. London, while still one of the world’s leading financial centres, is no longer omnipotent. There is a fierce battle being fought for the bits and pieces of business which will doubtless leave the UK. Several smaller countries will benefit modestly from the European upheaval. But the clear winner will likely be the US and especially New York.
There will be some surprise beneficiaries, particularly to the East and the Polish capital may be one of these. This is not just Brexit business. Current wealth, asset management and banking models are not really sustainable with back office staff stationed and paid in high-cost jurisdictions, often on the doorstep of the traders and portfolio managers.
Finance bosses have long been thinking about basing these staff further to the East or South in cheaper hubs, keen to absorb new staff. Brexit may just prove to be the political trigger to start the economic re-alignment.
