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Costs are climbing in part as they find it more difficult than anticipated to persuade reluctant Londoners to move abroad and reckon with a shortage of experienced bankers in Dublin, Paris and Frankfurt, said the people, who asked not to be identified discussing confidential matters.
“There’s no doubt that the costs are significantly bigger than the banks originally expected,” said Jon Terry, a partner and pay specialist at PricewaterhouseCoopers LLP. “There aren’t enough qualified people in local EU markets to meet the needs of the banks, so they are going to have to rely on moving more expensive staff from elsewhere. And a lot of those people don’t want to move.”
Banks may have to resort to costly relocation packages that include housing, private school costs and other perks to get Londoners to go. Someone who earned 1 million pounds ($1.3 million) in the U.K. could easily cost 1.5 million pounds in Paris or Frankfurt, after offsetting any increases in income taxes and other expenses, Terry estimated.
Moving a few hundred people into new offices in the European Union by April 2019 may add up to $100 million in personnel expenses alone, leaving aside the legal, technology and capital outlays related to setting up the entity, said one of the people. While few banks have provided public estimates of their costs, HSBC Holdings Plc said in July it faces a bill of as much as $300 million to transfer 1,000 staff to Paris, where it already has a fully-licensed subsidiary. [...]
In response to rising costs, talent shortages and the reluctance of staff to move to certain EU destinations, some banks plan to disperse employees across the continent rather than concentrating them in one place, said the people. Firms are also scaling back the number of workers they will move to a minimum, at least initially, they said. [...]