19 April 2018

Financial Times: Bank of England more optimistic on risk of City exodus post Brexit

The Bank of England is more sanguine about the immediate effects of Brexit on City of London jobs, revising down earlier estimates of how many roles would migrate to the European Union when the UK first leaves the bloc.

Sam Woods, a BoE deputy governor and head of its Prudential Regulation Authority, told lawmakers on Thursday that there had been a "downward drift" in forecasts made at the end of last year that as many as 10,000 City jobs would be lost to the EU on "Day 1". 

"My estimate remains that that number is in the 5,000 to 10,000 window" Mr Woods told the Committee on Exiting the European Union, but said that PRA forecasts were now at the lower end rather than the upper end of that estimate. 

"These are relatively modest numbers for Day One," he added. "The big question is where this goes longer term, and that fundamentally depends on what kind of deal is struck." 

He clarified that around 20 per cent of the figure would be net new jobs, as financial companies set up new operations in the EU to cope with the loss of "passporting" after Brexit. Passporting allows a financial company authorised in one EU country to sell its services and products in another. 

Both Mr Woods and Andrew Bailey, his counterpart at the Financial Conduct Authority, repeated calls for a bespoke financial-services treaty between the UK and the EU, saying it was "do-able" and potentially less technical than some recent regulatory initiatives. 

They would like a model of "equivalence" that would preserve some of the benefits of passporting to be set up, which would be based on outcomes rather than specific rules. So-called equivalence is a mechanism by which the EU allows foreign companies in certain sectors to sell products across the bloc. But it is patchy and can be revoked at any time. 

Mr Bailey said that a framework should be agreed as early as this year, adding that such a system would need a special mechanism to determine whether the UK and the EU were indeed equivalent in the future, and to resolve disputes. [...]

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