For over two years, Brexit has been the talk of the nation. Since British citizens voted to leave the EU back in 2016, many have speculated and attempted to predict the nation’s future.
Today, Theresa May is in the middle of negotiating the UK’s exit deal. Whilst uncertainty prevails, UK citizens are being left waiting anxiously as the PM negotiates their future.
The future of some sectors are far easier to predict than others. That said, one sector that remains truly difficult to predict is the financial services.
Mark Carney has already warned the harrowing economic impacts of a no-deal Brexit. Last week, he told May that a no-deal Brexit may have an equally disastrous impact as the 2008 financial crisis. With house prices potentially dropping by as much as 35%, Carney set forth the worst possible scenario.
Though this remains a ‘worst-case’ scenario, it is a scenario that the UK must prepare for.
Indeed, companies already have. Businesses have already been impacted before the UK has even left. More and more companies have made the decision to leave London and move their European headquarters elsewhere. Panasonic, Airbus, JP Morgan, Moneygram, European Medicines Agency, MUFG, Nomura Holdings, Barclays, Bank of America, the list keeps growing. These companies have relocated their European headquarters, taking thousands of jobs with them.
In fact, the CFA Institute has released its 2018 Brexit barometer survey. The survey reveals that 76% of EU respondents are likely to expect their firms to reduce their UK presence. This is followed by 67% of UK respondents and 54% of respondents from the rest of the world.
Will London continue its reign as the financial capital of Europe? Or will other economic hubs such as Frankfurt, Paris, Brussels or Milan step up?
Additionally, the survey results reveal yet another noteworthy statistic.
The majority of UK respondents expect Brexit to reduce the ability of their firms to hire the best talent.
Whereas only 9% of European respondents share this worry.
The inability to hire the best talent is a crucial setback for the UK’s financial services. In order to communicate with foreign markets, firms need employees who possess the relevant language skills.
But, Brexit is bound to make it difficult for EU nationals to migrate to the UK. Furthermore, it is no secret that the British teaching syllabus neglects modern languages. With less and less British students graduating without the ability to speak a European language at business level, this could be a problem.
And yet, it is not only the decreased influx of EU professionals that could be a problem for the UK’s financial services. But, the CFA has also revealed that 1 in 9 investment professionals plan to leave the UK after Brexit.
CEO of IW Capital, Luke Davis, has provided a commentary on the impacts of this:
“The UK, but particularly London, rely heavily on the financial services industry, and if 11% of employees in this sector did leave the UK after Brexit, it would have wider implications on the economy than just a loss of resource.
Financial services is a major party of our economy, and to lose over 10% of the workforce in this area would have extreme effects on our economic prospects today, and in the future. Sectorial leaders need to continue to make the UK financial industry attractive to employees to minimise the potential fallout that Brexit may cause.”
For now, all the UK can do is wait. But the contingency plans set in place by various businesses underscore the UK’s economic uncertainty.
