A report released today from consultancy firm Oliver Wyman puts Brexit-related job losses in wholesale banking — that’s services for large business clients and other banks — at 40,000 if there is a wider shift of the financial services infrastructure out of the U.K. The calculation is based on the U.K. leaving the EU single market.
That number is higher than some estimates — the think tank Bruegel, for example, estimated 30,000 jobs in financial services moving in the event of a hard Brexit, including jobs in accountancy and consulting. But other projections that assume so-called euro-clearing can no longer be done in London have been much higher — variously put at 83,000, 100,000 and 230,000.
All of these figures can be difficult to reconcile with the numbers coming out of the industry itself. Yes, announcements of banks moving to set up hubs in EU cities have begun to stack up recently. But they often only suggest creating a few hundred jobs, and they rarely if ever specify that those jobs will actually leave London. So it might be that the net result of Brexit is more financial services jobs on the Continent with hardly any fewer in the U.K. — possibly.
But think of it like a snowball that gets kicked down a hill. If it does, thousands of job losses could build up over time. A bank might find it makes sense to relocate other positions to a new Frankfurt hub, for example, because of economies of scale or easier collaboration with a team that has been relocated. Since banks are being forced to reconsider their structure by Brexit, they may decide it’s a great chance look for efficiencies or to take advantage of lower tax burdens.
Moves during Brexit are seen by some “as a way to re-evaluate costs across the globe,” Catherine McGuinnesss, the City of London Corporation’s policy chairman said.
A lot of banks really would rather not move. But if officials kick the snowball down the hill, the reasons they should will grow. And, perhaps unwittingly, European and U.K. officials are nudging the snowball over the edge.