Brexit Moment in 80 Days, No One Knows What’ll Happen, London’s Finance Industry on Tenterhooks

Brexit Moment in 80 Days, No One Knows What’ll Happen, London’s Finance Industry on Tenterhooks from Wolf Street

The stakes are enormous.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

With just 80 days remaining until Brexit Day, March 29, nerves are fraying on both sides of the English Channel. Nowhere is this more true than in the City of London where the Square Mile’s dominance of the global financial industry faces its biggest threat in decades. In the City’s worst-case scenario — a crash-out Brexit on March 29 — London-based firms that have not prepped properly for this outcome could be cut off from the continent altogether.

Since moving key operations and staff across the channel is a costly, complex, timely undertaking, many companies have preferred to play a waiting game. But the clock continues to tick down, and as the risk of a disorderly exit grows, inaction is becoming a risky strategy.

Since the EU Referendum in June 2016, only 36% of the financial services companies in London have said they are considering or have confirmed relocating operations and/or staff to Europe, according to the latest edition of Ernst&Young’s Brexit Tracker (which monitors 222 financial services firms in the UK). This rises to 56% (27 out of 48) among universal banks, investment banks, and brokerages.

A total of 20 companies have already announced a transfer of assets out of London to Europe. “Not all firms have publicly declared the value of the assets being transferred, but the Brexit Tracker has followed public announcements worth around £800 billion ($1 trillion),” the report says.

This figure echoes findings by a study published in November by German trade group Frankfurt Main Finance (FMF), which estimated that London is poised to lose €800 billion ($900 billion) in balance-sheet assets by March 29. According to German Bank Helaba, Frankfurt alone has attracted 25 lenders looking to move part of their operations out of the City of London, including Barclays, Lloyds Banking Group, Citigroup, Morgan Stanley, Credit Suisse, UBS, Nomura and Standard Chartered Bank.

Over the last quarter, 30% (67 out of 222) of firms monitored by E&Y’s Brexit Tracker confirmed at least one location in Europe to which they are moving, considering moving, or adding staff and/or operations, up from 25% last quarter. Dublin is the most sought after destination, with a total of 27 companies confirming they are moving or adding staff and/or operations there, up from 21 last quarter.

Paris has also gained in popularity, with 15 companies confirming they are moving or adding staff and/or operations to the French capital, up from 10 last quarter. Just four days ago Chubb European Group, one of the world’s biggest property and casualty insurers, became the latest financial firm to redomicile its businesses from London to France.

The City has suffered two even bigger blows in the last two months. In November U.S.-based CME group announced that it was shifting its European market for short-term financing, the largest in the EU, out of London to Amsterdam. Then in December, Union Investment, Germany’s second-biggest asset manager with over €330 billion euros under management, announced it would close existing euro-denominated swap trades at London’s LCH Ltd.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.