A seemingly innocuous tweet by the CEO of Goldman Sachs revealed the risk of London losing out to cities in other European countries as a result of Brexit.
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At the same time it is leaving the door ajar for cities elsewhere to take some of the UK capital’s business.
Lloyd Blankfein, CEO at Goldman Sachs, posted on Twitter after a visit to Frankfurt, presumably to check out where to relocate some London staff and where to put the European headquarters.
In the tweet he said: “Just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I’ll be spending a lot more time there.”
He is not one of those Twitter users that lets the world know what they are thinking in real-time all the time, which makes this more significant.
So the UK leaving the EU looks increasingly like the trigger for banks to ship jobs out. It is already happening. The threat of UK banks losing their right to operate in the EU after Brexit means banks will have to move jobs there.
But the bigger worry is that this triggers an even bigger exodus. Take Goldman Sachs again. The US bank has more people in Bangalore than in London. And Brexit could shift the balance further in Bangalore’s favour.
One source told me: “Brexit is likely to exasperate a trend that is already underway. Companies like Goldman Sachs are creating a globally distributed and integrated operating model, following a methodical global staffing/resourcing model aimed at optimising the whole system. You can say that all banking – and many companies from other industries – are following similar approaches. In future, Goldman Sachs will employ only those people in London who have to be there.”“Out of nowhere, Bangalore has emerged as one of Goldman Sachs’ primary locations of which there are just four: New York, London, Salt lake City, and Bangalore.” And it is not just tech but expertise in banking that is in Bangalore.
The fintech sector in London is holding up well in the light of Brexit, but as nothing has changed yet this is not that surprising. Unlike large banks which have to plan well ahead fintech companies could decide to move to a new home much later.
If EU professionals from the EU decide to leave the UK, which research suggested will happen, then fintech companies might have to go with them.
Another source said: “It’s a Tweet. OK, but unlike Trump it is more considered.”
“Bangalore: yes, but they are I am sure mostly back office. And BaFin and the European regulators will need senior management and their support to be based in Frankfurt. But I keep on hearing that the bulge bracket banks want to cut massively operating cost, and that Brexit has been a cover for that. That would leave London the loser.”