The transition period announced on 19 March 2018 has not stemmed the steady stream of financial services companies publicly announcing organisational changes in response to Brexit, including staff and/or operational moves.
As of June 2018, 34 per cent (75 out of 222) of the companies monitored in EY’s Financial Services Brexit Tracker had publicly confirmed, or stated their intentions, to move some of their operations and/or staff from the UK to Europe. This is a two-percentage point rise since March, building on the one-percentage point rise the previous quarter (December 2017).
This uptick is also evidenced in the number of firms to publicly confirm at least one location in Europe to move staff and/or operations to. As of June 2018, 24 per cent (53 out of 222) had done so, compared with 21 per cent (47 out of 222) in March 2018 and 19 per cent (42 out of 222) in December 2017.
Based on the companies that have specified which types of roles could be moving, the indication is that roughly half will be front office positions, such as broker-dealers, sales and trading, and distribution.
Omar Ali, UK Financial Services Leader at EY, comments: “The transition period, when confirmed, means that we avoid the much-feared ‘cliff edge’, but the level of change to how financial services firms operate will still be significant and the time window to meet these challenges is short. Until there is more certainty around key issues, such as the degree of access, movement of people and cross border contract continuity we should continue to expect companies to make operational moves, and prudently stick to their original contingency plans.”
Operational decisions – banks most vocal about relocation
27 universal banks, investment banks and brokerages have said they are considering moving, or will move, staff/operations out of the UK; of these, 18 have named at least one European city. 22 wealth and asset managers have said they are considering moving, or will move, staff/operations; of these, 14 have named at least one European city. 15 insurers and insurance brokers have said they are considering moving, or will move, staff/operations; of these, 14 have named at least one European city.
Favoured locations – Dublin and Frankfurt retain the top spot
Dublin and Frankfurt remain the frontrunners in popularity, attracting 21 and 12 companies respectively since the day of the Referendum result. The majority of firms that have confirmed Frankfurt are banks, and those that have confirmed Dublin are mainly asset managers. Luxembourg is the next most popular destination, attracting 11 companies, followed by Paris, attracting 8.
Relocation estimates – staff moves remains flat, but more firms are announcing job moves
Across the firms tracked, the number of UK staff that could potentially relocate to Europe has remained broadly flat versus the last quarter – at around 10,000 people. While the total number of firms confirming relocation figures has gradually increased (32 vs 28 last quarter), some companies have revised down their worst-case estimates for job relocations out of the UK.
Omar Ali concludes: “Companies’ worst-case scenarios appear to be less drastic than initially feared, but words are now becoming actions and plans are becoming reality. Firms have not yet made final decisions on the exact number of staff relocation or new jobs and are instead concentrating on the immediate operational challenges to be ready for Day One of Brexit. A key focus is to ensure the continuity of contracts that are currently in place which cover time periods beyond the end of the 2021 transition.
“Most firms are yet to iron out all the finer details, but there is evidence to suggest they are continuing to make definitive decisions, with many recognising that the Transition is not yet locked in, and may not be until very late in the day. We are seeing more and more companies name multiple locations, unsurprisingly focused on those where they have existing operations or there is an existing financial services infrastructure to slot into. This points to the fact that it is unlikely we’ll see one pre-eminent financial services hub emerge in Europe, and London will remain a leading global financial centre.”