Britain’s decision to leave the European Union has imperiled the City’s status as the region’s financial center. So far, the loss of jobs has been more of a dribble than an exodus. But the current hiatus masks a longer-term threat, as firms choosing where to house new positions expand elsewhere.
Even more heartening for British bankers is how firms rank their priorities for the coming year. Retaining talent is cited as the most important business necessity by 56% of respondents, beating the 27% who see recruiting for existing positions as essential and dwarfing the 2% seeking to limit their expenditure on employees. Salaries and bonuses look safe for U.K. financial staff.
Leaving the EU has hurt the U.K. finance industry less than expected. EY’s most recent Brexit Tracker revised its estimate for the number of jobs relocating from London to 7,400, down from 7,600 a year earlier.
But it may not last. EY reckons the pandemic has made firms temporarily less aggressive in moving staff. “Delayed moves should pick up over the coming year, not least due to ongoing pressure from EU regulators,” said Omar Ali, EY’s head of financial services.
Moreover, the biggest threat the City faces in the post-Brexit financial environment isn’t so much the risk that existing jobs get shifted to other capital cities. Rather, it’s the new jobs created elsewhere in Europe that might otherwise have led to extra desks in Canary Wharf and the square mile that endanger London’s preeminence.
In that regard, recent news is more worrisome for the City. Hedge fund Millenium Management, which oversees $57.5 billion, has rented a Paris building with the potential to increase its staff there by about fivefold to 100, Bloomberg News reported earlier this month. The New York-based firm currently has about 500 London employees. ExodusPoint Capital Management, a $13.6 billion hedge fund, will start hiring traders in Paris in the coming months to add to its 20 staff there, once regulators have approved its application to expand.
In investment banking, Morgan Stanley intends to double its Paris-based staff to 300 by the end of next year. JPMorgan Chase & Co. expects to have 800 employees there by the end of this year, more than triple its headcount prior to Brexit.
The pandemic has highlighted how technology makes physical location less relevant to how knowledge workers do their jobs. That in turn undermines the City’s argument that clustering banking, accounting, legal services and all of the other paraphernalia of finance in one place gives it an insurmountable advantage over its European rivals.
EY’s tracker estimates that firms on the Continent have added about 2,800 jobs linked to Brexit since the referendum to withdraw was held, topping the 2,200 positions created in the U.K. That gap, albeit modest, is already heading in the wrong direction as far as London is concerned. It’s where additional headcount gets added, rather than geographical reassignments, that will ultimately decide the City’s post-Brexit fate.
More From This Writer and Others at Bloomberg Opinion:
• The World Doesn’t Need Financial Hubs Any More: Paul J. Davies
• Amsterdam is Booming. Europe Must Take Note: Lionel Laurent
• Brexit Boosted Exports of Rich British Bankers: Mark Gilbert
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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