Job gains for Ireland but no clear winner in finance, yet, from Brexit exodus out of London

Finance firms have announced that about 7,600 jobs will move from the UK to the EU, according to a study by consultancy EY

Fri, 26 Mar, 2021 - 12:26

Silla Brush

In July 2016, a month after Britain voted to leave the EU, Boris Johnson was asked whether he thought the finance industry would keep its rights to trade freely in the EU. “I do, I do,” he told reporters. It was never that simple.

Half a decade later, billions of euros in assets and thousands of jobs have moved to the rest of Europe after the UK negotiated a bare-bones trade deal with the EU that largely sidelined finance, giving cities across the EU the chance to lure firms in flux.

European cities like Amsterdam, Dublin, Frankfurt, and Paris have each captured some of the shifts so far, although none has emerged as the clear winner, yet.

Some of these changes, like share trading volumes, happened overnight. In other areas, like jobs, it is more of a slow drift.

"We will have Frankfurt, Amsterdam, Paris, and Dublin all in the mix to take some part of the financial system,” Mairead McGuinness, the EU commissioner for financial services told journalists earlier this month.

The situation remains fluid and the eventual outcome uncertain. The UK and EU are due to sign a memo of understanding at the end of March to cooperate on financial rules, which might smooth the path to greater access for British firms through so-called equivalence rulings in the future.

Areas key to London’s decades-long dominance as a financial centre — including the clearing of trades — have proven sticky so far.

“I don’t think you can create a financial centre,” said Douglas Flint, chairman of UK fund manager Standard Life Aberdeen.

The EU’s challenge is one of where do you choose to locate such a centre and how do you get other EU competing countries to cede whatever activities they host.

But if the first three months of 2021 are any indication, Brexit could remake financial centres across Europe in the coming years. Here’s what has happened so far:

European equity markets opened on January 4 to a once-in-generation, “big bang” shift. Nearly all of the trading volume in shares of European companies that was handled in the UK bolted to the EU.

London soon lost its crown to Amsterdam as the continent’s top place to buy and sell shares. Britain is now hoping to boost equity markets by making it easier for companies to go public in London.

London has long been a global centre for interest rate swaps trading, recently beating out New York and cities across Europe and Asia.

But the City took a hit to its dominance after the EU blocked firms based inside its borders from trading certain benchmark contracts on London-based platforms.

Initial public offerings are another area where London's Square Mile continues to overshadow its continental rivals.

Listings in the UK are firmly on course for a record first quarter, with companies from Dr Martens to Russian discount retailer Fix Price raising a combined €6.1bn.

That’s before the UK government’s proposed loosening of listing requirements takes effect.

Takeovers of publicly-traded UK companies have risen more than sevenfold. But this may reflect weakness rather than strength, however.

Finance firms have announced that about 7,600 jobs will move from the UK to the EU, according to a study by consultancy EY.

Dublin has attracted the largest absolute numbers of firms of all types relocating from the UK. Frankfurt and Paris have also been popular among larger firms like universal banks, investment banks, and brokerages.