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IT jobs at financial services firms in London could be moved to other European cities as businesses commit to developing hubs outside the UK.
But future losses could be more damaging as these European Union (EU) financial services hubs, comprising finance firms and the financial technology (fintech) operators that support their digital transformation, grow at the expense of London equivalents.
According to a study from professional services firm EY, around 7,000 jobs in the financial services sector could be moved out of London as the UK prepares to leave the EU. It expects a further 2,000 jobs to be created in the EU as a result.
The financial services sector and the businesses that support it account for huge volumes of IT jobs, which are often well paid.
According to EY’s Brexit Tracker, which questioned 222 financial services firms, 36% of UK financial services companies are considering relocating or have confirmed they will relocate operations and/or staff to Europe. For big banks, investment banks and brokerages, the figure is higher, at 56%.
In the three months from September to November 2018, Dublin attracted six more financial services companies and Paris attracted five more.
Financial services firms also reported that about 2,000 new European roles had been created in response to Brexit, with Dublin, Luxembourg, Frankfurt and Paris the most popular locations for these roles.
Read more about Brexit’s impact on UK financial services sector
- Economic analysis warns thousands of jobs in science and tech could be at risk if UK crashes out of EU with no deal.
- UK banks have plans to move some of their operations to the EU, with the search for EU-based IT professionals underway.
- Loss of access to the single market and the ability for banks to trade across Europe mean the UK will no longer be the place for fintech HQs.
Omar Ali, UK financial services leader at EY, said: “The City is further ahead in implementing its Brexit contingency plans than many other sectors, and our numbers only reflect the moves that have been announced publicly. We know that behind the scenes firms are continuing to plan for a no-deal scenario.”
A total of 27 companies confirmed they were moving to or adding staff and/or operations in Dublin in the three months from September to November 2018 quarter, compared with 21 in the previous quarter, according to EY. Another 15 companies confirmed they were moving or adding some staff and/or operations in Paris, compared to 10 in the previous three months.
Frankfurt and Luxemburg were also mentioned as locations where firms were expanding.
But the job losses – only a small part of London’s 400,000 or so financial services workers – could be just the beginning of the losses to London and the UK. As financial services hubs develop in the EU ecosystems of firms, including those in the fast-growing fintech sector, London and the UK could miss out on future growth.
For example, Ireland has announced thousands of new jobs since the Brexit vote. IDA Ireland, which is responsible for attracting foreign investment to the country, said companies within its remit added 4,500 jobs last year. These include firms such as Morgan Stanley, Bank of America, Merrill Lynch and Barclays, all of which expanded in Ireland as part of their Brexit planning.
Tech Global Advocates recently announced the launch of Tech Paris Advocates, the latest entry in the global technology network.
The organisation was formed by a network of technologists and entrepreneurs in 2013 to promote London as a hub for tech companies. It has since grown to include another 11 locations as part of Tech Global Advocates.
Russ Shaw, founder of Tech London Advocates, said UK fintechs could seek refuge in Paris after Brexit. “It is early days, but Paris is going to have a strong fintech sector,” he said.
In terms of a gateway to the EU market for UK fintechs, Shaw said: “We assume fintech businesses will need passporting rights, so if they open up in Paris they can continue to operate across Europe.”
The Indian city of Bangalore is a good example of how ecosystems of companies in multiple sectors can develop. Bangalore was known as an IT hub, but developed beyond that after attracting large businesses keen to tap the skills the city had to offer. The knock-on effect has been the creation of a rich business ecosystem and one of the fastest growing cities in the world.