The official process of taking the United Kingdom out of the European Union has started and the clock is already ticking on the actualization of Brexit. The Brexit vote is in no doubt a geopolitical event that could forever change the face of sovereignty, diplomatic ties, foreign policy, and trade. In the run up to the Brexit referendum in June 2016, people in the UK took up fierce positions on both sides of the debate to “Brexit” the EU and to “Bremain” in the EU.
The Brexit camp eventually won at the polls and the rest as they say is history. Now, all stakeholders (irrespective of their support or opposition to Brexit) must come on board to ensure that the UK survives and thrives in a post-Brexit world. This piece seeks to explore the potential impact of Brexit on the British economy, the Pounds, and on the labor market going forward.
The Pound begins a volatile journey in the forex markets
In the wake of the Brexit vote last year, the UK pound crashed to a 31-year low and UK’s FTSE 100 recorded massive losses. The declines reverberated across the oceans as the U.S. stock markets also recorded flash declines.
Last month, Theresa May invoked Article 50 to take Britain out of the EU and stakeholders are worried about how the Pound will fare going forward. Howard Wilkerson, an analyst at 24Option observes that that “the next two years will be highly volatile for the Pounds as its fights to keep its value in the forex markets as news about negotiations continue to break.”
Interestingly, Theresa May doesn’t quite share the same cautious sentiments and she is confident that the British economy is strong enough to weather the storm. While addressing Parliament last month, she expressed her confidence in the resilience of the economy. In her words, “there were predictions about what would happen to the economy if the United Kingdom voted to leave… Those predictions have not proved to be correct. We see a strong economy.”
Banks are preparing to move jobs out of Britain
The UK and the city of London in particular are regarded as the financial center of the European Union. Hence, most global banks and other financial institutions have their global/European heads of operations in the UK. However, the clamor for Brexit started raising apprehensions that most of these banks might be forced to move their European heads away from London if Brexit materializes.
The main reasons banks might need to relocate out of London is that there’s no guarantee that the Brexit negotiations will end in Britain’s favor; hence, firms operating out of Britain might find it somewhat difficult to access markets in the EU.
The relocation of financial institutions from the UK might in turn trigger massive job losses – some people won’t be keen on leaving their family and friends to follow a job to another country – the employers might find better hiring deals if they employ workers in the new countries.
Last week, Richard Gnodde, chief executive of Goldman Sachs International revealed that his bank has started making plans to move London jobs to Europe. In his words, “we’ll hire people inside of Europe itself and there will be some movement (from London).” It might interest you to know that Goldman Sachs currently employs about 6,000 people in London.
In another development, Colm Kelleher, president of Morgan Stanley revealed that his bank might be forced to lay off workers if it needs to move its HQ from London to Europe. In his words, “our business model involves all employees who need to live in different places and have children and so on… You can’t just order them around like units on the board. So we’re going to be very considered on this. We’re not making grand statements.” It might interest you to know that Morgan Stanley employs more than 5000 people in London.