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UK to lose £1tn of financial assets to Europe due to Brexit

The Financial Times logo The Financial Times 20/03/2019 Stephen Morris in London

London’s future trading relationship with the EU is still in question: London, United Kingdom, February 17, 2018:Skyline of City of London with Waterloo brodge in the foreground, business EDITORIAL STOCK PHOTO London, United Kingdom, February 17, 2018:Skyline of City of London with Waterloo brodge in the foreground, business DOWNLOAD PREVIEW London, United Kingdom, February 17, 2018Skyline of City of London Photo Taken On: February 16th, 2018 business,city,london,skyline,waterloo,architecture,banking,boat,bridge,building,bus,cathedral,cityscape,day,decker,district,double,downtown,exterior,ferry More ID 110542800 © Wael Alreweie/Dreamstime.com © Wael Alreweie/Dreamstime London, United Kingdom, February 17, 2018:Skyline of City of London with Waterloo brodge in the foreground, business EDITORIAL STOCK PHOTO London, United Kingdom, February 17, 2018:Skyline of City of London with Waterloo brodge in the foreground, business DOWNLOAD PREVIEW London, United Kingdom, February 17, 2018Skyline of City of London Photo Taken On: February 16th, 2018 business,city,london,skyline,waterloo,architecture,banking,boat,bridge,building,bus,cathedral,cityscape,day,decker,district,double,downtown,exterior,ferry More ID 110542800 © Wael Alreweie/Dreamstime.com Financial services companies have committed to move about £1tn of assets out of the UK into Europe as the industry triggers its worst-case contingency plans with no Brexit deal in sight, according to consultancy EY.

The estimate by EY — which mainly covers client assets and cash moved out of the UK by banks and fund managers as well as the transfer of balance sheets as operations are relocated — has increased by £200bn since the last survey in January.

Banks and investors are now being forced to finalise plans only days from the Brexit deadline, with London’s future trading relationship with the EU still in question after Theresa May failed for a second time to secure parliamentary approval for her deal last week. She now faces having to ask Brussels for an extension to Brexit, causing added uncertainty for businesses in the UK.

Related: Facts to know about Brexit [Photo Services]


The number of jobs likely to move to the continent has remained steady at about 7,000, according to the EY study, which tracks the public declarations of 222 UK-based financial services firms on their intentions to restructure.

About 2,000 new Europe-based roles have already been created since the June 2016 referendum, the consultancy said.

“The relocation of 7,000 high-paid finance jobs will inevitably hit the UK tax base,” said Omar Ali, EY’s head of financial services. “Even using a conservative estimate . . . the direct loss to the Exchequer from employment taxes would be around £600m. In reality, the average salary and therefore tax loss is likely to be much higher.”

At this stage, only the biggest institutions have made concrete commitments. Three-quarters of the 24 global banks tracked have announced significant relocations of operations to Europe, with Frankfurt the most popular destination with 12 lenders bulking up in the German financial capital.

Britain's Prime Minister Theresa May leaves 10 Downing Street in London on March 20, 2019 ahead of the weekly Prime Minister's Questions (PMQs) question and answer session in the House of Commons. - Britain will write to the EU to seek a short delay to Brexit, but Brussels has warned any decision may only come next week -- just before the scheduled departure date. Exactly a thousand days on from the seismic 2016 referendum decision to leave the European Union, a divorce deal negotiated by May is blocked in parliament and political turmoil grips the country. (Photo by Daniel LEAL-OLIVAS / AFP)        (Photo credit should read DANIEL LEAL-OLIVAS/AFP/Getty Images) © Catalyst Images Britain's Prime Minister Theresa May leaves 10 Downing Street in London on March 20, 2019 ahead of the weekly Prime Minister's Questions (PMQs) question and answer session in the House of Commons. - Britain will write to the EU to seek a short delay to Brexit, but Brussels has warned any decision may only come next week -- just before the scheduled departure date. Exactly a thousand days on from the seismic 2016 referendum decision to leave the European Union, a divorce deal negotiated by May is blocked in parliament and political turmoil grips the country. (Photo by Daniel LEAL-OLIVAS / AFP) (Photo credit should read DANIEL LEAL-OLIVAS/AFP/Getty Images)

Paris and Dublin are the next most popular with eight and six banks, respectively, EY said. However, the majority of big banks’ operations remain in London at this point.

On Tuesday, US giant Citigroup said its new broker-dealer in Frankfurt was now fully operational and trading for EU clients instead of London, while Bank of America warned there was no going back on the $400m it had already spent leasing offices and moving people to Paris and Dublin.

Similarly, Barclays was given approval by a UK court to move €190bn of assets to its Irish subsidiary because of what a judge called “continuing uncertainty over . . . a ‘no-deal’ Brexit”.

When the entire range of financial firms is considered, the picture is less clear. As of the end of February, only 39 per cent of the 222 surveyed companies had stated their intentions to relocate some operations to Europe, the new survey showed.

FELIXSTOWE, ENGLAND - MARCH 19: Cranes catch the evening light at the Port of Felixstowe Ltd., a subsidiary of CK Hutchison Holdings Ltd on March 19, 2019 in Felixstowe, England. The deep water port of Felixstowe, in Suffolk is the United Kingdom's busiest container port, dealing with 42% of Britain's containerised trade. The port has agreed to increase capacity by more than 40%, to help freight shipping after Brexit. (Photo by Dan Kitwood/Getty Images) © Catalyst Images FELIXSTOWE, ENGLAND - MARCH 19: Cranes catch the evening light at the Port of Felixstowe Ltd., a subsidiary of CK Hutchison Holdings Ltd on March 19, 2019 in Felixstowe, England. The deep water port of Felixstowe, in Suffolk is the United Kingdom's busiest container port, dealing with 42% of Britain's containerised trade. The port has agreed to increase capacity by more than 40%, to help freight shipping after Brexit. (Photo by Dan Kitwood/Getty Images)

The £1tn figure was reached using the statements of the 23 companies, mainly banks, that have already formally announced a shift of assets out of the UK, which means that the “conservative” figure is likely to continue increasing, according to EY.

“As the 29th of March draws nearer, no financial services businesses can know for sure how a disorderly Brexit will impact them, their clients, people and supply chains or the UK economy,” Mr Ali said. “Continued uncertainty will undoubtedly lead to more assets and people being transferred from the UK.”

On Tuesday Andrea Enria, chair of the ECB’s bank supervisory agency, told the FT that he expected about €1.2tn of assets to be moved to fall under its remit.

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