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26 June 2019

EY Financial Services Brexit Tracker: Impact of Brexit on UK Financial Services nears £4 billion despite sector pausing job and asset moves

Since the EU Referendum, UK Financial Services Firms have disclosed £1.3bn of relocation costs, legal advice, contingency provisions, plus an additional £2.6bn for capital injections to scale new non-UK headquarters.

As of 31 May 2019, the direct financial impact of Brexit on major Financial Services Firms has reached nearly £4 billion. This sum includes £1.3bn cost of relocating staff and operations, legal advice, contingency provisions, as well as an additional £2.6bn for capital injections to scale new non-UK headquarters.  Only 13 out of the 222 Firms monitored by EY’s Financial Services Brexit Tracker have put a figure on the direct financial impact of Brexit, with the actual figure therefore likely to be higher. 
EY’s Brexit Tracker also found the number of planned jobs (7,000) and assets (£1 trillion) moves remained flat from the last quarter, reflecting that Firms paused or slowed down their Brexit preparations once the extension to October was announced.  Many Firms appear reluctant to make the final decision to move until they absolutely have to.

The impact of Brexit on the economy has also affected the Financial Services sector, with slow demand for credit and low interest rates hitting revenues.  A further 13 Firms, monitored by the EY Tracker, reported some financial detriment from Brexit, without quantifying the cost.  These announcements covered share price falls, lower profits, dividend cuts, a slowdown in lending, loss of customers and reduced capital market activities. 

Another 20 Firms have made public pronouncements on the impact of Brexit, without going into more detail.  Amongst FinTech companies, fundraising challenges and deferred M&A were the most voiced financial concerns, alongside the potential loss of talent and access to the free market.

In addition, 26 Firms have spoken about Brexit having a positive impact on their business, with a further 12 Firms flagging short term opportunities from the UK leaving the EU, mainly around benefitting from any market volatility. In the past three months, the volume of all public statements on the impact on Brexit, from the 222 companies monitored by the Brexit Tracker, has increased threefold (20) from the previous quarter between December 2018 and February 2019 (6).  [...]

Relocations have begun but Firms await clarification on final Brexit deal before triggering more widespread movement of staff

The number of companies which have publicly confirmed, or stated their intentions, to move some of their operations and/or staff from the UK to Europe has risen slightly quarter on quarter to 41% (91 out of 222) from 39% (87 out of 222). The number of jobs that could relocate from the UK to Europe remains flat at around 7,000, according to the Tracker’s analysis.

However, Firms are beginning to provide greater clarity on the jobs which have already moved to Europe. Amongst the large investment banks monitored in the Tracker, nearly 1,000 jobs have already relocated to the continent. However, this figure represents just 15% of the total volume of investment banking staff currently marked for relocation to Europe from the UK. 

The amount of assets that Firms monitored by the Tracker have indicated will move to Europe as a result of Brexit is unchanged at around £1 trillion, again reflecting that Financial Services Firms paused their Brexit planning between March and May. [...]

Luxembourg continues to attract Financial Services Firms as post-Brexit site for operations

Of the companies monitored by the Brexit Tracker, Dublin remains the most popular location with 29 companies saying they are considering or have confirmed relocating operations and/or staff to the city. Luxembourg has made the largest gains over the past three months, attracting four more companies to a total of 23, just ahead of Frankfurt which has attracted 22 Firms to date.  That reflects recent company announcements confirming Luxembourg as a prime location for asset managers, whereas the companies choosing Frankfurt remain large investment banks. 

EY Financial Services Brexit Tracker

© Ernst & Young

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