To add to the doom and gloom that a hard Brexit is likely to bring to the financial industry, a study published by the Oliver Wyman group says that 40,000 bank jobs could leave the UK in the case of a hard Brexit.
Hard Brexit refers to the situation where the UK leaves the eurozone with no free access to the market. This is expected to affect the financial industry very deeply.
Some of the large banks and financial institutions might opt for a simple change in licensing by opting to get a license in the eurozone as well, while others might go for more wholesale changes that are likely to affect the services provided to both investors and institutions.
Large Banks Moving Out
Already we have seen many of the large banks move their branches from London to Frankfurt in anticipation of a hard Brexit and this is likely to result in the moving of thousands of employees, senior management and also building infrastructure. 35,000-40,000 jobs are likely going to be relocated, the report said.
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The report also goes on to add that this shift in infrastructure and jobs is likely to require $30 – $50 billion in new investments, which would be a major overhead for the financial institutions. Also, the European Central Bank had made it clear that any license granted by it would have to meet the highest regulatory standards.
This means that any plans for banks and other financial institutions to open shell companies in the eurozone while continuing to book their exposure in London would not work and are likely to be deal with severely.
The procedures and structures become more and clearer as time goes on and as we move towards the actual exit of the UK. Also, financial institutions have to take into consideration new local taxes and other charges that they are likely to face in their new destinations.
They will also have to deal with the fragmented banking structure that is likely to result as they move out of the UK and into the eurozone. This adds to the uncertainty surrounding the Brexit process and its implications.