1 year to Brexit – the banking exodus?

| 09-04-2018 | treasuryXL |

If all goes as stated, then the United Kingdom will be leaving the European Union on 29th March 2019. There has been fierce competition within the EU to entice banks away from London and to settle within the Euro zone. In London there is a fear that there will be a banking exodus –  an industry that has prospered and made London a global centre. At till now banks have been able to sell their services into Europe via London, that this is envisaged to change. So, how are the major European cities faring in their campaigns?

What is at stake?

The scenarios of job losses are varied – 10,000 job in banking, 20,000 in further financial services. Others speak of job losses totaling more than 200,000. The large US investment banks retain more than 80 per cent of their European staff in London. The main target appears to be the Euro clearing role – a settlement service mainly in financial derivatives denominated in Euro’s that is now performed in London.

The Netherlands has certainly tried to attract interest from foreign banks and has many good qualities. Most of the population speak English, and there is a good infrastructure. Tax incentives are offered to qualified foreign workers, together with a global port in Rotterdam. The Netherlands Foreign Investment Agency is actively engaging with foreign companies, extoling the virtues of the country. Recently, Unilever took the decision to place its headquarters in Rotterdam – even though they have had a head office there for close on 100 years. Whilst there is already an appreciable physical presence of foreign banks on Dutch soil, there have yet to be any big announcements about a bank moving from London to Amsterdam or Rotterdam.

Germany, and specifically Frankfurt, have also been hard at work. The economy minister for the state of Hesse, claims that more than 20 financial institutions have chosen for Frankfurt. As of today, their names have not all been revealed. Frankfurt is an established financial centre, though discernably smaller than London. As well as banks, there are also regional corporate treasury centres, prime brokers, legal services and other ancillary groups.

Paris – that has been chosen for the European Banking Authority – is also in the picture but does not appear to be attracting the financial institutions. If banks follow the London model, then they would rather be closer to the central bank – the ECB – and that is headquartered in Frankfurt.

Relocation of the financial industry from London to Europe will be good for local employment. It is not just the direct banking industry that will be of benefit to the local communities. The support services are very significant and must also be factored into any equation.

With now less than 12 months to go till Brexit, the race will be heating up to woo the banks as the prize is very enticing and the gains to local economies very large!!

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