Brexit uncertainty has forced City firms to move at least £800bn worth of assets out of London and into rival EU cities, new data reveals.
Investment banks, fund managers and insurers have already moved hundreds of billions of pounds out of Britain and into European hubs in a bid to protect their clients, EY said on Monday.
The £800bn comes from asset managers moving EU customer assets out of UK funds and banks booking assets through a European hub instead of a UK one.
The accounting giant, which has been tracking the plans of 222 of the UK’s biggest finance companies since the referendum in June 2016, warned that the figure is likely to swell in the coming months.
The UK is due to leave the EU on March 29 but MPs have still not voted through a deal, raising fears in the City of a no-deal exit. A crucial vote on Theresa May’s proposed plan is expected to take place next Tuesday.
“The closer we get to 29 March without a deal, the more assets will be transferred and headcount hired locally or relocated,” said EY’s banking expert Omar Ali.
EY said it expects 7,000 jobs across the sector to relocate from London to Europe in the near future, down from its initial prediction that 10,000 would go, while 2,000 roles on the Continent have been created in response to Brexit.
City institutions have already accepted that they will lose their existing passporting rights that give them uninhibited access to EU markets, and are concerned the UK government’s plan to pursue so-called “enhanced equivalence” with EU financial rules will turn Britain into rule-takers.
A letter from anti-Brexit lobbyists circulated among major financial services firms late last year, claiming the City is “suffering death by a thousand cuts” and that Mrs May’s “second-rate” withdrawal agreement would be damaging for the sector. The industry paid a record £72bn in taxes to the Treasury in 2017.
“In anticipation of the Parliamentary vote in January, the City will be watching closely to see if the proposed Brexit deal will be accepted or whether it’s back to the drawing board for the Government,” said Mr Ali. “As things stand, financial services firms have no choice but to continue preparing on the basis of a ‘no deal’ scenario.”
A no-deal Brexit will force banks to move more jobs to rival financial centres such as Frankfurt or Paris than initially hoped, with some of Britain’s top private schools looking to expand in Europe as a result.
Julian Thomas, the headmaster of Wellington, told The Times on Monday that he was studying “European opportunities from Brexit as financial centres move”.