EY Financial Services Brexit Tracker: Financial Services firms put contingency plans in action as asset and job relocation continues to increase

20 March 2019

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  • Since the EU Referendum, 23 companies monitored have announced a transfer of assets out of UK to Europe. Not all firms have publicly declared the value of the assets being transferred, but the EY Brexit Tracker has followed public announcements worth around £1 trillion, up from £800 billion last quarter.
  • The number of jobs that could relocate from the UK to Europe in the near future stands at around 7,000, with the number of companies that have confirmed a specific number of potential staff moves increasing 30% to 39 up from 30.
  • Since the EU Referendum, 63% (30 out of 48) of universal banks, investment banks and brokerages have said they are considering or have confirmed relocating operations and/or staff to Europe. 
  • Dublin remains the most popular location with 28 companies saying they are considering or have confirmed relocating operations and/or staff. However, the gap has narrowed between the number of companies confirming Frankfurt (21), Luxembourg (19) and Paris (18).

LONDON, 20 March 2019 – As of 28 February 2019, there has been a steady increase in the number of Financial Services Firms publicly committing to move people, operations and assets to prepare for Brexit.

Looking at the Financial Services firms who will be most affected by loss of access to EU markets, 52% (74 out of 143) of universal banks, investment banks or brokerages, wealth and asset managers and insurers monitored by EY’s Financial Services Brexit Tracker have publicly confirmed, or stated their intentions, to move some of their operations and/or staff from the UK to Europe.

The proportion is particularly high in the banking sector and even more marked amongst Globally Systematic Important Banks (G-SIBs)*.  Out of the 24 G-SIBs the EY Tracker monitors, 75% (18 out of 24) have announced operations and/or staff moves as a result of Brexit. Frankfurt is the big winner of this shift with 12 G-SIB’s moving some parts of their operations or staff there.  Given their size, many G-SIBs have chosen multiple locations to move operations and/or staff to, with Paris (8) and Dublin (6), as the next popular.  The size of the moves are still relatively small and the majority of the G-SIBs current UK business is not moving away at this stage.

Sixty-three percent (30 out of 48) of universal banks, investment banks and brokerages monitored by the Brexit Tracker, have publicly confirmed, or stated their intentions, to move some of their operations and/or staff from the UK to Europe.   This number falls to 39% (87 out of 222) for all Financial Services companies, which includes those less likely to need to move or publicise their plans, such as private equity, FinTechs and UK focused retail banks.

Omar Ali, UK Financial Services Leader at EY, comments:
“Since the Referendum, the City has been on the front foot in planning for Brexit. In the event the UK leaves the European Union without a deal, Financial Services firms have plans to mitigate as far as possible the impact on their business and customers. But, as the day draws nearer, we need to recognise that there are risks that are out of the sector’s control. No Financial Services businesses can know for sure how a disorderly Brexit will impact them, their clients, people and supply chains or, more broadly, the UK economy.

“As the 29 March draws nearer, companies are reconfirming or revising the statements they have made about the extent of staff and operational changes they are making, but we are not seeing many last-minute surprises - firms are executing their plans as expected. The value of assets is creeping up, the number of jobs moving is relatively stable as a total, but we are seeing individual firms reduce the number of staff they are moving, whilst still ensuring they are in a position to serve their end customers. Continued uncertainty will undoubtedly lead to more assets and people being transferred from the UK and not necessarily to the EU.”

Staff and asset moves to Europe gradually increasing
The number of jobs that could relocate from the UK to Europe in the near future stands at around 7,000, according to the Tracker. Whilst the numbers of staff being relocated is flat quarter on quarter, the number of Financial Services companies that have put a number on the staff they are moving or considering moving out of the UK into Europe leapt 30% to 39 up from 30. In short, the last quarter has seen more companies make their plans concrete, but the total number of roles moving remains flat as many companies have revised the number of roles they are moving.

The relocation of 7,000 high paid finance jobs will inevitably hit the UK tax base. The nature of the roles that are shifting, often moving for regulatory reasons, are at the very top of the salary spectrum. Even at a conservative estimate that the average salary was at the bottom of the highest tax bracket of £150,000, the direct loss to the Exchequer from employment taxes would be around c.£600m**.  In reality, the average salary and therefore tax loss is likely to be much higher.  There would also be an additional loss of VAT and corporate tax as salaries are spent abroad.

Twenty-three companies have announced a transfer of assets out of the UK to Europe. Of those which have stated they intend to transfer assets out of the UK, ten are banks, eight are insurance providers, and five are wealth and asset managers. Not all firms have publicly declared the value of the assets being transferred, but out of those that have given a value of the assets which could move, EY’s Brexit Tracker analysis suggests a conservative estimate of around £1 trillion, up from £800 billion as at 30 November 2018. That total is likely to increase as we move towards Brexit, with the total assets of the UK banking sector alone estimated to be almost £8 trillion..

Across Europe, in addition to the 7,000 roles relocating from the UK, more than 2,300 new jobs have been added or are in the process of being added to Financial Services firms in response to Brexit. Of these just over 500 are people hired/or to be hired in London..

Dublin remains the top relocation destination
The choice of location continues to be mixed. Of the companies monitored by the Brexit Tracker, three more confirmed plans to move or add some staff and/or operations to both Paris and Luxembourg, with the numbers rising from 15 to 18 and 16 to 19 in the last quarter respectively. Dublin remains the top relocation destination. 28 companies have confirmed they are moving or adding some staff and/or operations to Ireland’s capital city, up from 27 last quarter.

Frankfurt continues to attract firms, with 21 companies in total confirming they are moving or adding some staff and/or operations there. Other European cities which received confirmation of staff and/or operational moves include Amsterdam (6), Madrid (6), Milan (5), and Brussels (5).

Twenty-eight asset managers are considering moving or have confirmed that they are moving operations and/or staff to Europe from the UK. 14 asset managers have confirmed Dublin, whilst 10 have chosen Luxembourg. Ahead of the 29 March deadline, most asset managers have now secured additional permissions and licenses to allow them to continue to serve their clients in a post-Brexit landscape.

Omar Ali concludes:           

“Financial Services are crucial to the UK’s future prosperity and are clearly negatively impacted by the uncertainty around the future of the UK’s trading relationships. The City is resilient and it will remain the dominant European financial centre, thanks to the breadth of capabilities and the depth of its capital markets, but there is no room for complacency. With only three paragraphs on Financial Services in the Political Declaration about the future trading relationship with the EU, it is critical that politicians focus on achieving an orderly exit and then securing a future trading relationship that adequately covers financial services.”

ENDS

Notes to Editors

  • The EY Brexit Tracker monitors the public statements made by 222 of the largest Financial Services firms with significant operations in the UK across universal banks, investment banks, brokerages, wealth and asset managers, retail banks, private equity houses, insurers and insurance brokers, and FinTechs.
  • The Tracker captures public statements made by these firms on key issues across sub-sectors relating to staffing, domicile, financial impact, policy asks, product changes, remuneration and opportunities.
  • As the Brexit Tracker only captures pronouncements of the largest Financial Services firms with significant operations in the UK, some companies which have made public pronouncements on Brexit are not included in the statistics as they are not contained within the sample.
  • The Brexit Tracker runs from 24 June 2016. For this press release, data is complete as of 28 February 2019.
  • *GSIBs are identified by the Financial Stability Board (FSB) and are recognised as the largest, globally systemically important banks - http://www.fsb.org/2018/11/2018-list-of-global-systemically-important-banks-g-sibs/
  • ** Estimate is based on loss of income tax and employee NI as well as employer NI, Apprenticeship Levy