_Central London: Brexit and financial job losses

Bank of England Deputy Governors Sam Woods and Jon Cunliffe have clarified the Bank’s view while speaking to a House of Lords select committee, which casts a different light on these reports.  

• The forecast is not from the Bank of England, it is from Oliver Wyman, and the Bank is not endorsing it. The Oliver Wyman forecast is for 65,000 to 75,000 jobs moved out of the UK in an “extreme” scenario of the UK leaving the EU with no deal, no transition period and defaulting to WTO rules. 
• Deputy Governor Sam Woods said that he considers it one of several possible scenarios that are “plausible”, but this is subject to what the actual deal looks like. 
• The Oliver Wyman forecast is for 30,000 to 35,000 banking and insurance jobs leaving, and 30,000 to 35,000 support industry roles (e.g. lawyers, accountants, contractors, etc). 
• The Bank of England has received contingency plans from banks and insurers, based on the no deal/no transition scenario, which suggest 10,000 jobs will probably go on “day one”; so the bigger losses would only come over time. 
• Deputy Governor Jon Cunliffe added that when considering these reports of worst-case scenarios from banks and insurers, we have to remember that for risk management purposes firms have to plan for the worst. He also added that what happens after the “day one” job relocations is difficult for anyone to say. 
• He also said that EU regulators were supportive of an initial situation of banks and insurers splitting operations between the UK and EU, which would then be subsequently reviewed. This suggests the EU are happy for the moves to be phased over time. 

Chief Economist comments: 

So the Bank of England did not forecast 75,000 City job losses, it said that in a worst case scenario that figure sounded plausible, as do other scenarios. I would also query whether so many non-financial job relocations will occur. If you are a City lawyer and post-Brexit you now have your banker clients split up between Frankfurt, Paris and Dublin, you may as well stay in London as you are now going to be spending a lot of time on an aeroplane. 

However, the main thing that comes across is that no-one, including the Bank of England, truly knows what is going to happen. Meanwhile, 23,000 TMT jobs were created in London in the first six months of this year; source: Office for National Statistics.