Brexit Begets Brexits

The British borders look like a one-way street with foreign bankers streaming out.
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Like Dunkirk, but in reverse. By Press Agency photographer [Public domain], via Wikimedia Commons

Like Dunkirk, but in reverse. By Press Agency photographer [Public domain], via Wikimedia Commons

Theresa May is fond of the phrase “Brexit means Brexit.” This week, it became clear that “Brexit” also means “hard Brexit” and “no single market” and “no financial services passport.” And because of those meanings, it also means that St. Pancras station is soon to be filling with British bankers bound for Paris and Frankfurt, and that, in a neat reversal of the sort of grumbling about Polish plumbers heard in certain Brexit-fancying corners—in other words, not The City—Poles will soon be whining about all of these British bankers driving up their rent. HSBC is sending French Rosetta Stone tapes to 1,000 London-based employees, and UBS is preparing to send a similar number across the Channel. Some 4,000 JPMorgan Chase employees may join them, while Goldman mulls shipping 3,000 jobs to Frankfurt, Warsaw, France, Spain and New York, which both Lloyd Blankfein and London Mayor Sadiq Khan say may be the biggest winner in the Brexit migration.

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said New York is “already a bit of a gainer” from Brexit as the Wall Street firm slows its previous policy of moving operations to London….

“I don’t know if there will be one one or ‘ones’ that we will go to,” Blankfein said of potential destination cities, noting that the bank used to be spread out across the region, running large operations in cities like Paris, Frankfurt and Milan. “It wasn’t the most efficient way to run our business. It wasn’t the safest way to run our business. It’s better to have people in a concentrated place where you can watch them. Technology is more expensive if people are distributed.”

Khan said he was telling European partners in Davos that "so-called hard Brexit may not benefit London or the UK because firms will leave London, but there's no guarantee they're going to go to Paris, Madrid, Frankfurt or Berlin".

"The reality is they'll probably go to Hong Kong, Singapore or New York. So a so-called hard Brexit could be a lose-lose, a lose for London and the UK, and a lose for the EU too," he said.

Wherever they’re going, they’re going.

"Most banks will make decisions on where to shift business by the end Q1, with initial headcounts of '100 to a few 100' to be moved," said one of the sources familiar with bank relocation plans, speaking on condition of anonymity….

"If you are a foreign institution hubbing into Europe from London, you really have no choice other than to think very quickly and carefully how to replicate the access to Europe ... If you have already established operations in Europe, you can take your time"….

The five largest U.S. banks, on the other hand, will need to apply for many new licenses and, in some cases, establish brand new entities in the EU right away.

Currently they employ around 40,000 people in London, more than in the rest of Europe combined, and rely on the EU "passporting" regime that allows them to offer services across the bloc out of their British hubs.

It’s all the talk at Davos. And that talk is of the “not if, but when and how many” variety.

Mr Orcel said that with Brexit “we have to anticipate the worst” adding that the bank can’t afford to be optimistic….

He said: “It will very much depend on the agreement the UK will reach with the EU, but yes we will have to move bankers.”

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said on Wednesday that “it looks like there will be more job movement than we hoped for….”

“We simply have to accommodate the laws of the land both in Britain and the EU,” Dimon, who had previously estimated 4,000 of 16,000 JPMorgan jobs may need to leave the U.K., told Bloomberg Television on Wednesday. “That will determine how many jobs and how many people and how many things you have to move.”

Needless to say, Theresa May is there, too, promising the world’s economic chieftans that everything is going to be alright, while also deploying her trademark charm to remind them that the whole mess is really their fault in the first place.

Mrs May said she had had a "very good positive discussion with banks about the benefits of the City of London, about what it is that has brought them to the City of London and how we can continue to build on that for the future"….

The prime minister also warned that inequality blamed on globalisation was aiding the "politics of division"….

She argued for reforms so the global economy created wealth for all, rather than a "privileged few", and "centre-ground mainstream politics" could "work for everyone".

Unfortunately, Davos Man wasn’t listening. He had to take a call from his real-estate broker in Zürich.

Banks put ‘hard’ Brexit move plans into action [Reuters]
Goodbye Passport, Hello Equivalence? Brexit Banks Lower Sights [Bloomberg]
Brexit: HSBC may move 20% of its London banking operations to Paris, chief executive Stuart Gulliver says [The Independent]
Brexit: UBS’s chief Andrea Orcel says the bank ‘will definitely’ have to move jobs from London [The Independent]
Goldman May Cut London Staff by 50% on Brexit, Handelsblatt Says [Bloomberg]
Wall Street Meets May in Davos as Banks Plan Own Brexit [Bloomberg]
Goldman Sachs’s Blankfein Says New York Is a Brexit ‘Gainer’ [Bloomberg]
London Mayor Sadiq Khan warns Asia, NY will win out from Brexit [Economic Times]
May’s ‘positive discussion’ with banks [BBC]

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