The latest data from the EY Financial Services Brexit Tracker shows that UK financial services firms continue to move jobs and assets to the EU while calling on the Westminster Government to ensure the UK maintains a cooperative trading relationship with the EU.
According to the latest data from the EY tracker, 43% — 95 out of 222 — of UK financial services firms have publicly stated they have moved or plan to move some UK operations and/or staff from the UK to Europe, taking the total number of job relocations since the EU Referendum to almost 7,600.
EY said 24 of the largest financial services firms — 10 banks, nine insurance companies and five wealth and asset managers –have so far transferred or announced an intention to transfer assets out of the UK to Europe due to Brexit.
Not all firms have publicly declared the value of the assets that could be transferred but, of those that have, EY’s Financial Services Brexit Tracker estimates the figure to be almost £1.3 trillion.
EY said Dublin, Luxembourg and Frankfurt remain the top choices for relocation.
“Financial Services Firms across Europe have a number of chapters still to write before they can close the book on Brexit,” said Omar Ali, EMEIA Financial Services Managing Partner for Client Services at EY.
“After the major hurdle of standing up new EU hubs, 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.
“UK and EU Firms are now awaiting the detail of the upcoming Memorandum of Understanding on Financial Services and will shortly face into a new round of Brexit discussions on the framework that will ultimately define the future relationship.
“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.
“Such ongoing uncertainty poses the risk of fragmented markets, which is inefficient and costly for all Financial Services users and potentially damaging to the global competitiveness of both the UK and EU.
“Fragmentation of European financial services will serve to only benefit the US and Asia.
“But 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.”
EY said the negative financial impact of leaving the EU is still being felt by some in the UK financial services sector.
Over a quarter — 57 out of 222 — of firms have publicly stated that Brexit is impacting or will negatively impact their business, up from 49 firms in January 2020.
“Since late December 2020 and in the two months since the Brexit deal, 10 financial services firms – made up from some of the largest retail and investment banks and wealth and asset managers operating in the UK – have publicly urged the UK Government and regulators to ensure that the UK sector remains competitive and open for business,” said EY.
“Public statements include calling for an operating environment that is accessible to both local and international trade and services businesses, and assurance that London does not lose its grip on its role as a key European trading hub.
“Since late December 2020, four global wealth and asset managers with combined assets under management of over US$10 trillion have called for greater clarification over the UK’s future regulatory regime, arguing for greater alignment rather than divergence from Europe, focused on establishing a flexible, co-operative, relationship with the EU.”
Dublin remains the most popular destination for staff relocations and new European hubs or offices, with 36 financial services firms saying they are considering or have confirmed relocating UK operations and/or staff to the Irish capital city.
Luxembourg is the second most popular destination and has attracted 29 companies. Frankfurt has attracted 23 companies.
Twenty Firms say they are considering or have confirmed relocating operations and/or staff to Paris. Other named locations include Madrid (8), Amsterdam (8), Brussels (6) and Milan (5).
Omar Ali concluded: “Specific policy work to align the UK and its closest trading partner remains crucial and will be mutually beneficial — uncertainty has been a thorn in the sector’s side for nearly five years.
“Firms in both the UK and the EU continue to deal with the challenges well, and the fact that no major service disruption occurred on 1 January 2021 demonstrated just how well prepared the Financial Services sector was.
“Looking ahead, the UK, as a leading global financial centre, will be as focussed on building relationships and competing with markets beyond European borders, as it will be on building its new relationship with the EU.
“There is already much activity underway as the UK redefines its future — the reviews into the UK Listing Regime and UK FinTech sector will be particularly key to its global positioning, and many eyes will be monitoring how the UK progresses new regulation on the emerging ESG and sustainable finance agendas.
“As all markets look to the future, the trade agreements to come will lay the foundations for a new era of global Financial Services.”