As the dust settles in a post-Brexit London, a different kind of exodus is taking place. Not only has the UK left the European Union, but several big investment banks are shifting their offices out of the capital.
The trend started before Brexit was concluded, but it’s accelerated in the six months since the UK formally left. The impact of the global pandemic and ongoing uncertainty over currency, trade, and access to the EU bloc has created a situation where it’s difficult to tell how the future will pan out. Some of the big names to leave, or announce an impending move, include Barclays, Goldman Sachs, and Morgan Stanley.
Another big name that has announced it will move thousands of staff out of the UK is Deutsche Bank. It's estimated that these banks could be taking as much as $1.2 trillion with them.
London as a financial hub
London has long been considered the world’s global financial centre and one of the most financially important hubs in the world. From its centre, big-name banks provide a range of services including payment processing and settlements, lending, trade finance, cash management, and foreign exchange. In fact, the British Sterling is second only to the Dollar and it remains one of the most important and traded currencies in the world. Unsurprisingly, Forex trading is the world's most-traded financial market, as it remains popular with professional and casual investors and has worldwide popularity. The current situation faced by London could have a drastic impact on the value of the GBP in these markets.
These moves will also have a significant impact on the British economy, and the economy of the capital. Not only do the presence of these names signify confidence in one of the world’s leading financial hubs, but staff contribute to multiple verticals of London life. Cafes, bars, restaurants, serviced apartments, taxis and public transport, and even the rental market are all set to feel the brunt of the banks' departure.
So where are they all going?
Confusion over the state of play and stalling in the talks between Brussels and London has caused problems for UK-based professionals. Those working directly with clients in the UK have to have a “chaperone” who’s based in the EU, whenever they engage in dialogue with clients. This adds unnecessary complications to making deals and agreements.
Instead, many are opting to relocate staff to Dublin in Ireland, or Berlin and Frankfurt in Germany. All relatively large financial centres offer an EU base as well as a good quality of life for workers. Many will continue to work at home, in locations that are not in the UK following the increase in this kind of working after the pandemic.
This poses a significant issue for London who’s built much of its economy on its being a financial centre. It could have wide-ranging implications for property, businesses, and society as a whole, especially if other big companies decide to follow suit. Much will depend on any deals that can be hashed out between policymakers, but the longer the situation remains unresolved, the more likely others will be to pack up and leave.
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