Will UK-based banks and businesses move their operations abroad? And if they do, how badly will it hit the UK economy?
The chief executive of Goldman Sachs, the world’s second largest investment bank, warned today that London “will stall” because of the risks from the Brexit process.
Timeline for Asset managers
- February 24, 2017
Lloyd Blankfein said Goldman Sachs, which employs 6,500 people in the UK, had “contingency plans” to move people depending on British prime minister Theresa May’s negotiations with the EU.
“We are talking about the long-term stability of huge economies with hundreds of millions of people and livelihoods at stake and huge gross domestic product,” Blankfein told the BBC.
Lloyds of London, the world’s biggest insurance market, last month confirmed plans to open a Brussels office by mid-2018.
“It is important that we are able to provide the market and customers with an effective solution that means business can carry on without interruption when the UK leaves the EU,” the group’s chief executive Inga Beale said at the time in a statement.
The new subsidiary will have its own board and employ about 60 staff initially, including people already working in Germany and Italy.
Other financial giants including HSBC, JP Morgan, UBS and Barclay’s have warned that many of their UK-based jobs could move to the Continent amid Brexit uncertainty.
Dublin, Frankfurt and Paris are the most popular destinations for new subsidiary offices.
“We expect almost a thousand jobs to move into Frankfurt, either being moved from London or newly set up in Frankfurt, and within a five-year period of time, we expect 10,000 additional jobs to be created,” Hubertus Vaeth, head of the lobby group Frankfurt Main Finance told BBC Radio 4’s Today Programme last month.
Manfred Weber, the leader of the largest political group in the European parliament, to which both the German chancellor and the commission president belong, said an estimated 100,000 UK jobs are at risk.
“When the UK is leaving the European Union it is not thinkable that at the end the whole euro business is managed in London. This is an external place, this is not an EU place any more. The euro business should be managed on EU soil,” said Weber at a press conference in Strasbourg on Tuesday.
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However, Andrew Lilico, executive director and principal of the consultancy Europe Economics, told Verdict that the potential danger posed by Brexit to the UK job market has been overplayed.
“Lots of businesses might have a very small number of people relocate, but there will also be people coming to the UK to take advantage of new opportunities,” he said.
“Some people who didn’t want their current circumstances to change want to play up the risks of moving operations away from the UK because it will have a negative impact on them, or at least make their lives more awkward.”
Lilico pointed to differences of opinion in the city about joining the euro under Tony Blair’s government.
“Big banks and financial institutions made all these big claims about what would happen if we didn’t join the euro years ago. How did that work out for them?”
In October, asset manager M&G confirmed it was looking to set up a new base in Luxembourg in response to the UK’s divorce from the EU.