After a shock result in the referendum, the UK has voted to leave the European Union (EU) with around 52% of the vote. The resulting effects on the financial sector are widespread. Patrick Brusnahan writes
The repercussions of the British vote to leave the EU are widespread. Sterling saw its biggest one-day fall in history, declining to $1.33, its lowest level in more than 40 years, as markets reacted.
However, Rob MacGregor of union UNITE believes that the effects could be immediate and damaging to those working within banks.
Speaking exclusively to RBI, he said: "I think the position of bank workers is going to be the same as workers in many sectors of our economy: we’re in uncharted territory. We have no real sense of the long term consequences of the UK’s removal from the EU. We don’t know what type of government will replace the one as a result of Cameron’s impending departure and what I think we are particularly concerned about is that in terms of worker protection, any new administration will see it as all bets are off.
"We don’t know at this stage the consequences on the UK finance industry. Our initial reading is that this is not going to be beneficial. I think for retail finance workers the picture is uncertain and the fact that finance workers, certainly since 2008, have been living with the consequences of the financial crash, their employment has been precarious. I don’t think the events of the last 24 hours have improved that position one bit."
MacGregor went on to say that this result could lead to banks leaving the market, so not only will working conditions not improve, there will be less jobs entirely. In fact, this could be the biggest impact the financial sector has been hit by in decades.
He continued: "Because these are unprecedented times, there’s a bit of crystal ball gazing, but I think it’s fair to say that the financial industry will not have seen anything like this since the deregulation in the early 1980s. I think this is a perfect storm for finance workers. We’ve got the increased digitalisation in the industry, which is stripping away many traditional administrative roles within banking, delivery channels for financial services are changing rapidly, and on top of that, you’re going to have political and economical uncertainty created by Brexit and it’s going to be a torrid time for the next few years, if not longer."
Simon Black, CEO of the PPRO Group, believes that this will have a drastic impact on the fintech community.
He said: "With an estimated 500 fintech companies in the UK, Brexit will cost the taxman around £5bn ($6.9bn) over the course of the next ten years, following the inevitable exit of the fintech companies themselves. As well as London being a global financial hub, the UK offers specific regulatory benefits, that when combines with a massive pool of talent, have made the UK the natural choice to be located both from a European perspective and for some companies even as a global base.
"But with their status as financial institutions recognised across the EU and EEA under threat, all of these businesses will not wait for trade deals to be resolved. They will immediately begin forming plans to relocate at least some of their operations, and the majority of new jobs will be outside the UK."
Mike Laven, CEO of Currencycloud, was slightly more optimistic.
"There’s no doubt that the nation’s decision to leave the EU has major macro-economic implications. Negotiations will be long and ongoing and this uncertainty alone means we can expect significant volatility ahead," he explained.
"However, London’s advantageous time zone, strong financial history and FX expertise aren’t going to disappear overnight. Somewhere else in Europe being a global financial capital? Seriously? It took decades to develop the infrastructure of firms, services, lawyers, insurers, intermediaries, and myriads of financial niches and massive personnel base that makes London special. Talk to European tech entrepreneurs and they are concerned about being cut off from London’s resources. Will it get more difficult? Of course. But with our contingency plans in place, we’ll avoid the doomsday scenarios."
The Financial Conduct Authority (FCA) also stated that the decision could affect the regulatory scene in the UK, but not for some time: "Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for government and Parliament.
"Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect."