After months of speculation, global lenders operating in the UK have finally started formalizing their plans for life after Brexit, with the industry poised for an exodus out of London. Morgan Stanley may soon become the first US bank to decide on its formal relocation plans, with all signs pointing to a move to Frankfurt.
Just last week, two of Japan’s largest banks announced their plans to relocate to Frankfurt with Nomura and Daiwa Securities Group both opting for the German financial hub. The decision to set up subsidiaries there was expected to generate activity in the banking space in London, where many firms have been holding off on a final verdict for months.
Frankfurt and Dublin are the two cities emerging as the most likely landing spots for banking personnel leaving London. Many lenders have been forced to abandon the prospect of realistically staying in London since the declaration by UK PM Theresa May to abandon passporting rights for banks – this has caused banks to rethink and opt for a base of operations within the bloc.
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Morgan Stanley’s move to Frankfurt could also create a mad dash for office space, which already looms as one of the city’s primary logistical challenges. Indeed, one of the biggest drawbacks to the city in past analyses has been a dearth of office space, which is unlikely to be sufficient to accommodate thousands of employees entering the labor pool. Morgan Stanley employs close to 5,000 employees in London alone, though it is unknown what percentage of this force could make their way to Frankfurt.
Multi-national relocation effort
Morgan Stanley’s broker-dealer business will likely be relocating to Frankfurt, while its asset management operations could move to Dublin. The approach may be the norm moving forward as no single European city boasts the same financial infrastructure or advantages associated with London.
London itself could be primed to lose upwards of 10,000 banking jobs as a result of Brexit, according to a recent report from think tank Bruegel. The loss would be a staggering blow for a financial industry that is already reeling from waves of job cuts and internal restructurings.
One wildcard with the situation could be May’s stunning electoral setback earlier this month. May had been an advocate for a harder line Brexit, however the recent electoral results could potentially open the door for a softer deal that could ultimately mitigate the impact on the financial services industry – its unclear how passporting rights will be affected moving forward though many banks may be awaiting a clearer signal on the matter before making a final decision.