Financial Services Ireland

EY Financial Services Brexit Tracker

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EY Financial Services Brexit Tracker

Financial Services firms go quiet on relocation announcements as focus moves to securing a strong future trading relationship

Over the last six months, Financial Services (FS) firms in the UK have pressed pause on announcing any operational changes to their businesses in response to Brexit. The latest data from EY’s Financial Services Brexit Tracker – captured between July and December 2019 – indicates that the industry’s largest players have largely implemented their plans to ensure they can remain operational post-Brexit. Firms are now increasingly turning their attention to the negotiations on the future relationship with the EU.

Since the Brexit Referendum, a total of 30 FS firms have confirmed they are moving or adding some staff and/or operations to Dublin (up by one since the last EY Brexit Tracker in September 2019).

Brexit

Of the 222 firms monitored by EY’s Brexit Tracker, the number publicly confirming relocations of staff and operations has only risen by one since July 2019, compared to an increase of 11 in the first half of 2019. The proportion of firms that have said they are considering or have confirmed relocating operations and/or staff to Europe has now seemingly stabilised at 41% (92 out of 222). Within this, the proportion of universal banks, investment banks and brokerages that have said they are considering or have confirmed relocating operations and/or staff to Europe is higher at nearly two thirds (63% or 30 out of 48).

The silence on new operational announcements contrasts with an increase in companies making public calls for specific outcomes during the Brexit negotiations. Between March and August 2019, just two companies expressed concerns, but, between September and December 2019, eight firms have voiced their position on the necessary steps they feel the UK Government should take to safeguard the UK’s financial services sector post Brexit.

Commenting on the results of the Tracker, Cormac Kelly, Financial Services Brexit Lead for EY Ireland said:

The important focus for most financial services firms was having to make an early Brexit call and to transition their clients over to a new European operating model.  With regulators and clients pressing for detailed updates over the last two years it’s no surprise that most have completed these steps and that momentum has stabilised.

Firms are now immersed in the day-to-day challenge of running a European banking or investment management business.  Stressed markets, low interest rates and continuing business uncertainty coupled with the pressing demand for revenue growth and productivity improvement all point to a challenging year ahead.   Building out teams with talent from across the globe, embedding new governance policies and processes and successfully demonstrating that they have created robust, sustaining entities of real substance which have delivered on their licence commitments is a major task.

“The influx of diverse financial services firms in Dublin has dramatically changed the landscape and has created the basis for a significantly more important financial services centre.  However, work and attention is needed to embed this expanded community and to ensure that it has the necessary support, infrastructure, future talent and connectivity to achieve its full potential.”

Professor Neil Gibson, Chief Economist, EY Ireland said:

The levelling off in FS relocations to Dublin is to be expected as the focus turns to agreeing the legislation for a post Brexit landscape. However, Dublin’s FS ecosystem has been substantively altered by its success to-date in attracting activity from London and the city’s profile on the global stage has been enhanced. With this success comes new challenges.  The pursuit and retention of talent for FS and the wider professional services sector is priority number one. Maintaining the strong relationships and excellent connectivity with London is also critical, particularly with data showing a marked pick up in firms looking to locate into London in preparation for the new global financial landscape.”

Brexit hits the bottom line

Since the Referendum in 2016, over a fifth (22% or 49 out of 222) of companies monitored have publicly voiced concerns over the negative impact which Brexit is having or will have on their business. Of these, 17 are investment banks, universal banks and brokerages, and 11 are wealth and asset managers. Specific factors cited include reduced profitability, asset outflows, deferred M&A, a slowdown in lending, and customer losses in markets outside of the UK.

Incremental job creation bolstered in the EU as relocations come to a halt

The number of jobs that could relocate from London to the EU remains flat at around 7,000. Alongside relocating UK staff, firms are continuing to hire locally on the continent as a result of Brexit. Since the Referendum, 43 Financial Services firms have announced plans to make local hires for existing or newly created roles, equating to over 2,400 new jobs in the EU, with Frankfurt, Dublin, Paris and Luxembourg named as the main destinations.

Explore our other Brexit insights, and if you have any questions, don’t hesitate to get in touch.

Cormac Kelly

International Banking Advisory Lead
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