Reports that HSBC and US bank JP Morgan could move thousands of jobs out of the UK if it leaves the European Union (EU) means uncertainty for IT workers.
IT workers in the UK banking sector are hardened to the threat of job losses with thousand cut since the financial crisis of 2008, Brexit adds another threat to staff.
Even without the fear of an EU exit, banks are cutting back on UK IT staff. On 22 June 2016, the Royal Bank of Scotland confirmed it is cutting 900 IT and back office jobs in the UK as the business shrinks.
David Banister, analyst at Ovum, said in the short term IT projects will be put on hold, “particularly if there is an EU regulatory element, which is a lot of them”.
He said in the longer term there is a worry that some big overseas banks will have to move parts of their operation to Europe for compliance reasons.
Areas such as Luxemburg might be attractive, as well as Dublin and even Scotland if Nicola Sturgeon’s efforts to keep Scotland in the EU succeed.
“Dublin is looking to do well out of it. If Scotland goes, there is a good case for Glasgow and Edinburgh, which have a lot of back office jobs,” said Bannister.
But it is not just a London problem, he added. “Lots of the data and processing centres are in other places – JP Morgan is one of the biggest employers in Bournemouth, for example, and Barclays is next door in Poole.”
Of course much of this depends on whether or not banks would retain their passporting rights, which allow them to trade across Europe.
“[If banks retain passporting rights] London remains the global centre it always has been and nothing changes. If they do [remove passporting rights], then most banks will need to relocate to Europe and will probably choose Dublin,” wrote Chris Skinner, chairman of Financial Services Club, in a blog post.
Changes in trading sector
According to Bannister, there could also be huge changes in the trading sector.
He said the proposed merger between London Stock Exchange and Deutsche Börse is an example that could hit the UK. “The merged company was going to be based in London, but that’s not so certain now” he said.
But one senior IT professional, who wished to remain anonymous, does not think the Brexit vote will have much impact on UK IT finance jobs because banks are already moving these roles out of the UK.
“Most firms have some kind of resource location strategy and much of that is about getting roles into lower cost locations. The tide is moving roles out of London/UK already. Brexit will not change or accelerate that and certainly not in the next year or two,” said the senior IT professional.
“IT in the big banks is very global, so I’m not sure Brexit will have a direct or quick impact.”
Read more about the Brexit and the IT sector
- The UK IT sector reacts with alarm, tempered by a calm pragmatism, to the British Referendum verdict to leave the European Union. Reporting by the Computer Weekly team
- The gaming industry holds concerns that leaving the European Union will affect access to games development talent
- A third of security professionals are concerned that a Brexit vote will hamper cyber threat intelligence sharing with EU states
- If the UK left the EU, it would be disastrous for the digital technology industry because investment would drop and easy access to top talent would end.
The senior IT professional also said Brexit could mean more IT work as banks adjust to the new trading environment. “Whenever big changes such as this happen, the odds are more IT work rather than less. Brexit could increase the IT work required as banks adjust to life outside the EU.”
The anonymous source also said a fear of the unknown is a main problem.
This unknown could cause the growing number of financial technology (fintech) companies to put their plans in the UK on hold.
These firms rely on skills, entrepreneurship and money from outside the UK. Although London is seen as a fintech leader in Europe, there are other regional hubs willing and able to accommodate companies in need of a location to centre their businesses if the UK becomes less attractive.
Places such as Amsterdam, Berlin and cities in the Nordic countries have thriving startup scenes that have easy access to the right skills and are attractive to investors due to the EU single market.
For example, the Nordic countries are well known for startups, with the number of fintech startups in the region increasing every year.
According to The Nordic Web, in 2015 fintech startups attracted more capital than any other vertical in the Nordics for the first time, leaving traditionally strong sectors such as enterprise software as a service (SaaS) and gaming behind.
Meanwhile, Amsterdam’s city government is attracting startups, including fintechs, as a gateway to Europe.
Forrester Research believes London will lose fintechs if it leaves the EU. “London’s financial services power and fintech cluster will shift to the continent,” it said in a report.
Emmanuel Lumineau, the CEO of Financial Conduct Authority regulated startup BrickVest, a real estate investment platforms, said the company might have to move some of its business and people to other EU member states.
“Without doubt, the UK is now a less attractive option for fintech investment platforms that want to operate across Europe,” said Lumineau.
“Platforms such as Brickvest are typically regulated by the FCA, whose framework allows us, and companies such as ours, to target investors across Europe.
“Brexit now means firms will eventually need to find a new regulator on the continent to continue doing business across Europe. Cities such as Paris, Berlin or Frankfurt can offer this. Consequently, BrickVest may have to shift some of our business and team abroad.”