It could be argued that the city of London is unlikely to be challenged by Brexit in the short term due to its competitive advantages and a highly developed ecosystem of capabilities and support services that would be hard to quickly unwind or replicate elsewhere. But the city, which has enjoyed a status as the financial capital of Europe, could still face uncertainty and competition as a result of the decision to leave the EU.
Currently, the UK leads Europe in Euro-denominated wholesale banking, FX and derivatives trading. Competing European financial centers have historically pushed to have key Euro-related activities and infrastructure relocated within the Eurozone and overseen by the European Central Bank (ECB), and Brexit could make such outcomes more likely as the UK would lose protection from enforcement of single market rules.
The financial services industry is a major employer in London. Fortune.com reports that nearly 11 percent of the 360,000 workers in the city come from other places in the EU. These roughly 40,000 workers may find continued employment in the UK a challenge after the exit.
Additionally, foreign financial firms who opened branches in London in order to do business with the rest of Europe will find the city a less advantageous place for their outposts. If they pack up operations for other European cities, London stands to lose those jobs, as well.
We’ll have to wait and see how things shake out as Brexit continues, but here’s a look at how firms may begin to prepare in advance of these changes to come.
For everything you want to know about Brexit’s impact on the Financial Services industry, click here.