It is estimated that Brexit could trigger over than 230,000 job losses in Britain’s financial services sector if euro clearing shifts to continental Europe and full access to the bloc’s single market is lost, according to top industry officials.
London is currently the world’s biggest hub for clearing euro-denominated financial contracts but some continental policymakers want this shifted to the eurozone after the Brexit.
As per a report in The Guardian, Xavier Rolet, Chief Executive of the London Stock Exchange, said that the Brexit could have an impact on “unimaginably large” contracts which are cleared through the City and which might need to be transferred to the 27 remaining EU member states or other financial centres.
Rolet has called for a five-year transition period for Britain to leave the EU, but the triggering of Article 50 in March could prompt banks to implement contingency plans to shift business out of London.
The result of the referendum has prompted several European centres to pitch for the business cleared mainly through the London Clearing House which is operated by the LSE.
As reported by Finance Magnates last September, London’s Investment banks were reported to be planning for the loss of euro clearing after the Brexit with France or Germany expected to succeed London over the clearing of $570 billion worth of euro derivatives after the UK.
Forex in Russia: 100 Steps BackGo to article >>
Even ahead of the 23 June referendum HSBC said that it could move 1,000 roles to Paris in a preemptive move before the Brexit was completed. Douglas Flint, HSBC’s chairman said that banks without operations elsewhere in the EU will likely trigger migration plans immediately after Brexit talks begin in March, estimating that “tens of thousands” of jobs are linked to EU “passporting” rights.
Banks currently have passporting rights, allowing them to operate across the eurozone from a base in Britain which they could lose after Brexit.
Potential banking job losses would depend on how they negotiate new licences with regulators on the continent, raising concerns about the back office staff across Britain’s regions which could impact on JPMorgan, Citigroup and Deutsche Bank, all of whom currently employ thousands of back-office staff in cities across Britain.
Rolet is also concerned about the “systemic impact” of moving contracts that are guaranteed by the London Clearing House if it was handled too quickly. He said: “Two years is just too short. A further three years after the two years of negotiation is needed to make a smooth departure from the EU.”
Along with Rolet, finance chiefs are seeking clarity on the EU exit strategy amid concerns regarding job losses if London loses euro clearing and passporting rights.