With just three months to go until the end of the Brexit transition period, financial services firms in the UK are making last minute preparations, and continue relocating staff and operations to Europe to keep channels open.
According to data from EY’s Financial Services Brexit Tracker, at the end of the last quarter, over 400 UK financial services role relocations to Europe were announced, taking the total number of jobs leaving London to maintain access to EU markets to over 7,500 to date. These figures just cover announcements and moves known to EY, but inevitably are less than the actual total.
Since the Brexit Referendum, 44 firms have announced plans to make local hires for existing or newly created roles in Europe, equating to over 2,850 new jobs, the Tracker shows. This represents an increase of over 400 since the beginning of the year, with Dublin, Luxembourg, Frankfurt, and Paris (in that order) named as the main favoured locations.
Dublin has remained the relocation destination of choice for financial services firms, a finding the EY Brexit tracker has consistently recorded.
Since 2016, 40% (88 out of 222) of firms monitored by the EY Financial Services Brexit Tracker have confirmed at least one location in Europe where they are moving or considering moving or adding staff and/or operations to. Within the 88, 26 firms have confirmed multiple locations for relocating staff and operations.
Dublin has remained the most popular destination for staff relocations and new European hubs or offices, with 34 FS firms saying they are considering or have confirmed relocating operations and/or staff to the city. Luxembourg is the second most popular destination, attracting 26 companies in total.
Frankfurt has attracted 23 companies, 19 of which are universal banks, investment banks or brokerages. Twenty firms say they are considering or have confirmed relocating operations and/or staff to Paris, 14 of which are universal banks, investment banks or brokerages.
Cormac Kelly, Financial Services Brexit Leader, EY, commented:
Many financial services firms had implemented the bulk of their relocation plans before the start of the year, and we saw very little movement in the first half of 2020. But as we fast approach the end of the transition period, we are seeing some firms act on the final phases of their Brexit planning, including relocations. This is despite the pandemic and consequent restrictions to the movement of people, which is clearly making it harder to relocate people and adds complexity for those who were looking to commute to EU locations.”
Simon MacAllister, Strategy and Transactions Partner and Brexit Lead, EY, added:
With the prospect of a deal between the UK and EU still hanging in the balance, the question of further impact will be driven by the decision on equivalence for financial services. A deal at this stage is only likely to cover goods tariffs and quotas and not address services or financial services. This adds extra risk and complexity for financial services firms in terms of the ongoing provision of service into the EU from the UK.”
The total estimated count for the migration of domiciled assets to the EU from London now stands at well over GBP1trn, EY figures show.
Twenty-four of the largest FS firms (ten banks, nine insurance providers, and five wealth and asset managers) have so far announced an intention to transfer assets out of the UK to Europe ahead of Brexit. Not all firms have publicly declared the value of the assets that could be transferred, but of those that have, EY’s Financial Services Brexit Tracker analysis suggests a conservative estimate of GBP1.2 trillion, up from GBP1 trillion at the end of 2019.
Meanwhile, public lobbying on future regulatory frameworks has intensified.
In the past nine months, the EY Tracker has recorded increased public announcements from wealth and asset management firms on regulation change post-Brexit.
Since January, some of the largest asset management companies – representing around GBP13 trillion AUM – have spoken out on the issue of whether the UK should align with or diverge from current EU regulatory frameworks.
As negotiations continue around a UK/EU deal for financial services, major investment firms are publicly adopting a vocal position on the continued use of MiFID II, the relative value of the UCITs framework and how London can remain a leading sustainable finance hub.
Says Cormac Kelly:
As we approach the final deadline, the lack of clarity around future trading agreements is fuelling ongoing debate within the financial services sector”.
“The time has now passed for firms to rely on short term equivalence assessments that would align to EU rules, and the sector’s attention is increasingly focused on the longer-term outlook. Firms are looking at new standards that will support the UK industry beyond the initial post-Brexit phase, ensuring it remains a leading global financial centre.”
This article first appeared in the October 2020 issue of Finance Dublin.