FS firms pause post-Brexit relocation plans

With 10 days to go until the UK officially leaves the EU, financial services firms have gone quiet on relocation announcements, and are focusing instead on the nature of post Brexit relationships, according to research from EY

The firm’s financial services Brexit tracker for the period July to December 2019 indicates firms have pressed pause on announcing any operational changes to their businesses.

The proportion of firms saying they are considering or have confirmed relocating operations and/or staff to Europe has now stabilised at 41% (92 out of 222). This figure has only risen by one since July 2019, compared to an increase of 11 in the first half of 2019.

EY says the silence on new operational announcements contrasts with an increase in companies making public calls for specific outcomes during the 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 government should take to safeguard the UK’s financial services sector post Brexit.

Omar Ali, UK financial services leader at EY, said: ‘Our data suggests that firms reached peak preparation in 2019 ahead of a potential no-deal Brexit.

‘Firms have built out the infrastructure they need on the continent to ensure they will be able to serve clients once Brexit happens – be that with or without a deal. They are now waiting for clarity on the level of cross border access and alignment – if indeed any.

‘Although everyone has their parachute ready, the industry is still seeking the softest landing, with a strong future trading relationship that reduces the ripple effect on the economy.’

Since the 2016 referendum, 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.

Specific factors cited include reduced profitability, asset outflows, deferred M&A, a slowdown in lending, and customer losses in markets outside of the UK.

EY’s data suggests the number of jobs that could relocate from London to the EU remains flat at around 7,000, underlining the capital’s continued importance as a financial centre.

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. Since July 2019, around 250 local roles have been announced.

Ali said: ‘There are more strategic decisions to make, including whether to operate multiple hubs across the Eurozone and in the UK or consolidate and restructure operations, and how large a part Europe will now play in global firms’ operating models, but it is hard to make those decisions while uncertainty still prevails.

‘The fact remains that no one solid alternative is emerging to challenge London as the preeminent financial centre in Europe, but financial centres around the globe from New York to Singapore do represent a real threat to European centres. This should be front of mind for all those at the negotiating table.’

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