Brexit: Banks try to calm staff nerves with staggered shift
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London: Banks are treading carefully, enacting two-stage contingency plans, to avoid losing nervous London-based staff as they work out how many jobs will have to move to continental Europe as Britain exits the European Union (EU).
British Prime Minister Theresa May will trigger formal EU divorce proceedings on Wednesday, launching two years of negotiations that will shape the future of Britain and Europe as well as London’s place as a global financial centre.
The move will also mark the point when investment banks, whose priority will be to ensure they can continue servicing their clients across Europe after 29 March 2019, begin taking concrete steps to prepare for Britain being outside the bloc.
“Everybody is prepared for a cliff edge scenario, which means you need to more or less have, in a very short period of time, people on the ground making sure whatever happens you are set,” Hubertus Vaeth, head of Frankfurt Main Finance, a group backed by local government to promote the city, said.
This first phase involves relatively small numbers to make sure the requisite licences, technology and infrastructure are in place, while the next requires longer term thinking on what the their European business will look like in the future, which is when bigger moves might take place. “We see a very short term dispersal of a small number of people ... in the next couple of months,” Vaeth said.
Anxiety in the city
Brexit is making many of Britain’s 2.2 million financial industry workers anxious about whether they risk losing their jobs or will have to consider relocating to Frankfurt, Dublin, Paris, Luxembourg or even Malta.
“If I ... stand up in front of my staff in London and say ‘I’m moving 1,000 of you to Frankfurt’, how many do you think will stick around?” a senior executive at a global bank said.
Employers must decide whether to try to move London-based staff or pay them off and hire again where any foreign operation is set up. This means they need to identify which roles will be impacted, which is likely to take some time.
Bank executives say moving significant numbers of jobs will likely form part of the final phase of adaptation to Brexit, but will not happen before any final deal is struck.
“Don’t look for a ‘big bang’ the day after Brexit in March 2019,” another senior executive at an international bank said. “Banks will be looking to use what they have to be able to continue operating and servicing clients in the EU. The jobs that will move, the impact will be known in 2025 and 2030 not 2019,” the executive added
In this so-called initial phase, staff moves are expected to be in the low hundreds, with the majority not taking place until at least 2018, banking sources told Reuters. “It’s not staff moving, it’s jobs moving,” said one banking source.
“There will also be some natural attrition whereby roles will not filled in London. It won’t really be so noticeable and there likely won’t be any big announcement.”
Stuart Gulliver, chief executive of HSBC, has softened his tone on his bank’s plan to move 1,000 staff to Paris, saying that half are French people who would be returning home and the bank is nowhere near talking to staff about the move. “Within one to two years, the City of London will have completely replaced the jobs that will have moved,” he said.
Banks only need around 30 people to get a subsidiary in Europe up and running, including setting up the infrastructure, legal and technology systems, the Association of Foreign Banks in Germany says.
While Europe’s financial centres are fighting for the spoils of Brexit, banks are unlikely to converge on a single city at first and are likely to want to retain some flexibility.
“There won’t be a single location – country teams will likely be based more in situ,” another banking source familiar with contingency plans said.
Goldman Sachs International, the European arm of the Wall Street bank, said last week it would begin by moving hundreds of people out of London in what its chief Richard Gnodde called “contingency plans” for the first phase.
Meanwhile, US rival Morgan Stanley, which one source told Reuters will ultimately have to move up to 1,000 jobs out of London, but may initially shift just 300 staff, according to reports in February.
And although Dublin is Bank of America’s default destination for a new base within the EU because it already has a fully licensed operation there, others are being examined.
“We are playing through all the scenarios. Nothing has been decided. Dublin is an option, just as Frankfurt or Amsterdam,” Nikolaus Naerger, Bank of America’s head of corporate banking in Germany said. Reuters