The UK’s powerhouse financial sector would face heightened risk and an exodus of 232,000 jobs without certainty over Britain’s Brexit deal, MPs have heard.
Xavier Rolet, chief executive of the London Stock Exchange Group (LSE), said two thirds of the job losses would be felt outside Greater London, with the blow coming as soon as the euro clearing operation leaves Britain’s shores.
You really have no choice but to think very quickly and carefully about how you replicate the access to the EUDouglas Flint
Speaking to MPs on the Treasury Select Committee, Mr Rolet said the jobs figure came from a report produced by professional services firm EY for the LSE, which not only took into account the “few thousand” jobs lost from euro clearing itself, but the entire impact on financial services if the operation was moved outside the UK.
“Its not the level revenue or the number of jobs created by the underlying activity that counts. It is the onwards upstream and downstream strategic relevance of the business for the trading, syndication, distribution, risk management, IT, as well as treasury management of corporate insurers.”
He said the report found that “as far as the entire United Kingdom is concerned, 232,000 jobs would be at risk or likely to be lost”.
Mr Rolet warned that the EU was already singling out the UK to disrupt its euro-clearing operation in a way that does not effect other countries, such as the United States or Japan.
He said the EU could take the “momentous decision” to claim the euro-clearing business via treaty or regulatory changes, or through the introduction of minor rules that have a far-reaching impact.
“I think it is to no surprise that almost a few days after the outcome of the referendum was known, one of the leaders of the continental European countries, out of the blue, claimed not manufacturing, not agricultural products, not wine and cheese-based industries, start-ups or fintech, but focused on clearing as he thought of the business to claim back.”
Mr Rolet’s comments came as Douglas Flint, group chairman of HSBC, said the bank may take “pre-emptive action” to move jobs to France, the Netherlands or Ireland before the Article 50 process is complete, but would wait longer before “pushing the button” on the move.
“If you have already established an operation in the EU you can take your time to decide whether or not to move quickly more leisurely, seeing how the negotiations flow,” Mr Flint said.
“But a bank like us with operations all over the EU including a significant full-service bank in France, you can take even longer to decide when to push the button.
“Nobody wants to push the button because the best outcome for everybody is the preservation of the status quo insofar as is possible.”
Banks have issued stark warnings since the Brexit vote, claiming thousands of jobs would shift to rival financial centres across Europe and the United States if Britain loses the right to sell financial services to the EU.
US banking giant JP Morgan said 4,000 jobs would leave the UK, Goldman Sachs threatened to move 2,000 roles if Britain loses passporting rights and HSBC claimed it would transfer 1,000 positions from London to Paris following the Brexit vote.
Focusing on a possible transition deal for financial services, Mr Rolet said the goal was to find a way to “maintain, nurture and promote” the UK economy, while preserving a strong trading relationship with the EU.
He said that Britain’s financial services would benefit from a grandfathering period of five years after Article 50 is triggered, while Mr Flint called for a two to three-year period.
The two city heavyweights and Elizabeth Corley, vice chair of Allianz Global Investors, also welcomed the idea of the Government clarifying any Brexit transition arrangement for financial services within the next eight to 10 weeks.
Mr Flint said the “ecosystem in London is a bit like a Jenga tower - you don’t know if you pull one small piece out whether nothing will happen or it will have a dramatic impact.”
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