Digital & Resilience

UK financial services stabilise five years on from triggering Brexit

By Justin Pugsley
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It found that only 7000 jobs have been lost in the City of London in contrast with announcements for 12,500 job losses in 2016 – and far lower than the predictions made back then by various forecasters for 100,000-250,000 roles to be eliminated. EY noted that five years on from Article 50, the situation has stabilised over the last 12 months. 

EY said that since the UK’s EU referendum, 44% of the largest UK-located financial services firms have announced plans to move some UK operations and/or staff to the EU. 

“As firms gained greater clarity on what the post-Brexit landscape would look like, plans were consolidated and, in some cases, firms revised down the number of people they would need to relocate,” said Omar Ali, EMEIA financial services leader at EY. He added that the majority of firms had finalised most of their operation moves ahead of 2020 and managed to serve their UK and EU clients with little disruption. 

During the last five years, 24 firms publicly declared they will transfer just over £1.3tn of UK assets to the EU – a figure which has remained broadly flat over the past 18 months, EY found. 

The European Central Bank (ECB) has been pressuring banks to move key staff and assets to the EU to service clients within the bloc. It wants to stamp out so-called back-to-back operations where EU business and risk management ends up being done in London. 

EY anticipates further operational and staff moves from financial services firms across Europe as Brexit increasingly becomes embedded in strategic business drivers and operating models. The ECB’s upcoming ‘desk mapping’ review could create further pressure for resources to be shifted to the EU from the UK. 

EY said Dublin has emerged as the big winner from Brexit with it being the location of choice for operational moves out of the UK. Luxembourg came second. Frankfurt and Paris were the top destinations for banks. 

Meanwhile, the UK has been striving to include financial services in the trade deals it signs with other countries, which could bear fruit in the years ahead, EY said.  

“The UK has signed a number of trade deals over recent years with key markets including Australia and Japan,” said Mr Ali. He explained that the data provisions in these deals will help increase cross-border financial services. However, he judged the deal signed with Switzerland, with its mutual recognition of regulatory regimes, as being particularly significant as it could become a gold standard template for other jurisdictions to copy. 

He said the UK is increasingly concentrating on innovative services and products and tailoring its regulation. These include innovations around fintech, the transition to net zero, diversity and inclusion, artificial intelligence and central bank digital currencies.

“When it comes to the future of global financial services, I have no doubt that both the UK and EU will continue to be world leading markets, driving innovation, progress and growth,” Mr Ali said. 

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