This morning, we have a new analysis, from a financial think tank New Financial, dedicated to better capital markets, with no obvious bias, which paints a disturbing picture.
Instead of jobs, they have focused on assets. They identified 275 firms moving or preparing to move assets – “Banks have moved or are moving around £800bn in assets from the UK to the EU, insurance firms are moving tens of billions of assets, and asset managers have transferred more than £65bn in funds.”
This closely matches an earlier (January) analysis by the FT, so seems pretty valid. They highlight that this is not a projection – it has happened, and is permanent –
“….for many firms in banking and finance, Brexit effectively happened some time last year. The political uncertainty since the referendum has forced firms to assume the worst-case scenario of a ‘no deal’ Brexit with no transition period, and to prepare accordingly. Many large firms have had their new entities in the EU up and running for months, and having spent tens or hundreds of millions of dollars on their contingency plans are not going to relocate business back to the UK anytime soon.”
On the jobs front, they explain the discrepancy thus –
“…we think the debate about how many staff have been moved so far and whether that is higher or lower than expected a few years ago is a red herring. Firms are keen to move as few staff as possible and so far at least regulators have been flexible. This will change in the next few years. We have identified nearly 5,000 expected staff moves or local hires in response to Brexit, but this is from only a small minority of firms and we expect this number to increase significantly in the next few years.”
Less ‘Project Fear’, it seems, more ‘Project Complacency’.
What are the real economy impacts though? the report finds that –
“£800bn in bank assets is nearly 10% of the UK banking system. The final tally is likely to be much higher, which will reduce the UK’s tax base, supervisory influence and ultimately have an impact on jobs.”
On a straight line comparison, the financial sector is responsible for around 6.5% of GDP, so that means we’ve potentially lost just over 0.5% of GDP on a permanent basis already.
More alarmingly, finance plays an important role in the tax base, contribution around 11% of government revenues, which suggests a loss to the treasury of between £7bn – £8bn, again on a permanent basis. In a somewhat neat symmetry, this is very close to our current net contribution to the EU. No Brexit Bonus.
There will be many leaver posters on here who dismiss this and come out with reams of data as to why yet another independent specialist group is wrong, but to repeat, this is not a forecast or a projection of what may happen in years 1 – 15 post Brexit. this stuff has happened. It’s a report from an insider research group that has simply counted the announcements and joined the dots. It is backed up by other data, from other independent sources.
The loss of City jobs turns out to the be the red herring. These losses will follow, but it is the relocation of a huge chunk of the financial sectors assets that is the real Brexit story, and on this, Leavers have now completely lost the argument.
Everyone else has just lost the money.
