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Brexit didn’t, on the face of it, do the City of London a serious injury. After a negotiation process where its concerns were either secondary or entirely ignored, the split didn’t prompt a sudden exodus of institutions and jobs. Early predictions that cutting off London-based banks from European markets would cost hundreds of thousands of jobs have proved overblown.
Instead, think-tank New Financial earlier this year put the total at about 7,500, probably a slight underestimate but a number echoed by other sources. That is despite more than 440 institutions moving part of their business or setting up hubs within the eurozone, and shifting assets equivalent to 10 per cent of the UK banking system. This does make sense. Soon after the 2016 referendum, and certainly after the industry’s preferred relationship with Europe didn’t even make it as far as the ill-fated Chequers plan, banks, insurers and asset managers restructured their operations to be ready for anything.
This wasn’t intended to be an end state, but simply to ensure they could operate, however Brexit unfolded. Since Brexit got done, Covid-19 has put off the industry’s adjustment to what might prove a more lasting equilibrium. The conversation about moving a reluctant banker to Frankfurt certainly becomes harder when a global pandemic has shut borders.
Regulators and politicians, even the rapacious ones of caricature, have had other priorities than prising business and people away from Europe’s leading financial centre. That is now changing. Brussels is eyeing reforms to clamp down on the use of cross-border arrangements that allow non-EU banks to do business in the bloc, in part because the use of these kinds of national permissions has increased since Brexit. Regulators are also increasingly revisiting bespoke arrangements and grace periods agreed with banks based in London to apply pressure to move more people.
This isn’t a uniform push: one bank contacted early faced losing traders to rivals who hadn’t yet been told those roles must move. In many cases, these are relocations that had already been agreed with regulators under Brexit plans and are only now being implemented. But the direction of travel is clear: straight down the M20 and keep going..
much more at FT