Brexit is one of those milestones in international history that will have a long-lasting aftertaste and effect on political and economic maps. As Taavet Hinrikus, CEO and Co-founder of TransferWise, a London-based cross-border payments startup, said, “Nothing’s changed yet but everything’s changed. This is likely to affect regulation and the movement of talent: two massive issues for business.”
Although the full specter of post-Brexit effect is yet to be discovered and witnessed, by judging the actions taken by large financial institutions, they won't let us wait long. Last year, Britain's FinTech sector generated 6.6 billion pounds in revenue, putting UK (London, precisely), as the number 1 global FInTech hub. The position, however, is now questioned widely as both financial institutions and FinTech startups have been reconsidering their strategies in the UK.
International businesses could shift as many as 100,000 jobs away from London within two years of the UK officially starting a process to leave the EU because they risk losing their passporting rights. As for the financial services jobs, some estimations suggest that Brexit could cost between 70,000–100,000 jobs by 2020.
HSBC, for example, was reported to be planning to move up to 1,000 staff from London to Paris if the UK left the single market. Moreover, according to the Financial Times, many of the US banks have been quietly bulking up European entities outside the UK, allowing them to transfer some activities quite quickly. However, as the source suggests, most of them still lack sufficient licenses to carry out many of the operations they at present run out of London.
JPMorgan Chase, prior to the vote, said it was likely to move 4,000 employees out of Europe. After the vote, however, the bank reported to leave a large portion of its workforce in London; however, it still plans to move at least 1,000 people out of London.
British retail and commercial banking group Lloyds Banking Group warned to cut 3,000 jobs as a post-Brexit measure explaining it with the vote to leave the European Union damaging to its ability to boost dividend payments.
The ‘wait-and-see’ team
While some have been cautioning to move or cut jobs in their UK businesses, others simply acknowledged the uncertainty and possible necessity to take actions.
“The ‘Brexit’ vote has plunged Britain and the rest of Europe into the unknown. A lot of FinTech peers are thinking about moving to Germany, removing the uncertainty of being based in London,” said Erik Engellau-Nilsson, Head of communications at Klarna, a Swedish FinTech firm.
Richard Willis, a partner at Alston & Bird’s Financial Services & Products Team, shared with the WSJ in an email that operators would have to wait “to see if the single-market features that the UK previously availed itself of as part of the EU will continue to be available in the new regime.”
According to the Financial Times, Jonathan Lewis, Head of Japan’s Nomura International, which employs about 2,600 staff in London, said it would have to “wait and see” how things unfolded before making any big decisions about its locations or operating structures. But as the source reports, his base case was that the UK would be left at a disadvantage. “I don’t see how anyone can say with any certainty that passporting will continue. Switzerland doesn’t have passporting, neither does the US, so we cannot assume we will,” Lewis shared with FT.