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Approaching half of the UK’s financial services firms have moved or plan to move some operations from the UK to Europe, with Dublin and Luxembourg the most popular EU destinations for staff relocations and new hubs.
According to professional services firm EY’s latest Brexit Tracker, this equates to 43% (95 out of 222) of finance firms, taking the total number of Brexit-related job moves to almost 7,600, up from 7,500 in October 2020.
More than a quarter (57) of the companies EY surveyed said that Brexit was having a negative impact on their business.
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EY found that Dublin and Luxembourg were the most popular alternatives to the UK, with 36 out of 222 companies opting for Dublin and 29 companies for Luxembourg. Frankfurt has attracted 23 companies, while Paris and Madrid have been selected by 14 and eight firms, respectively. Amsterdam has attracted eight companies, Brussels has secured six and Milan five.
Financial services were not included in the EU-UK trade deal that came into effect on 1 January, which has largely cut the City off from the EU.
Omar Ali, a managing partner at EY, said: “Financial services firms across Europe have a number of chapters still to write before they can close the book on Brexit.”
However, he suggested that the movement was beginning to ease.
“The days of significant swathes of asset and job relocation announcements appear to have passed and will likely be replaced by the slower yet ongoing movement of people and assets to Europe for compliance purposes.”
The tracker also noted a further rise in the value of assets moving to the continent from the UK. These now totalled almost £1.3 trillion, up from £1.2 trillion previously, EY said. Those transferring assets, or planning to transfer them, included 10 banks, nine insurance providers and five wealth and asset managers.
On 4 January more than €8 billion in daily share trading shifted from London to Amsterdam and Paris.
Ali said: “Fragmentation of European financial services will serve to only benefit the US and Asia,” with some trading leaving London for New York.
Although the UK and the EU are working on a memorandum of understanding on the finance sector which will lead to a new framework, it is not thought that there will be any breakthroughs on equivalence in the short term, which is key for British firms operating inside the bloc.
For EY this uncertainty was “potentially damaging to the global competitiveness of both the UK and EU”.
Ali added: “The challenges remain significant, and, as recent headlines evidence, the push and pull of markets across Europe for business historically led from the UK continues.
“These challenges can be overcome if the right areas are prioritised – although passporting and equivalence debates command the headlines, there are arguably far more complex matters involving data, capital, skilled talent and frictional costs, that need to be settled.”
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