- REUTERS/Eddie Keogh
- Banks and financial firms that make up about 6.5% of Britain’s GDP have already taken precautionary measures to prep for Brexit, meaning a lot of damage is already done.
- Banking is just the tip of the iceberg with many other industries also making irrevocable decisions
The damage to the economy from Brexit is already afoot – so much so that the act of leaving the EU itself is, at this point, increasingly irrelevant.
Uncertainty mounted with Prime Minister Theresa May’s landslide defeat on her Brexit deal on Tuesday. But even before that, leaders of companies with UK operations haven’t been taking any chances. The latest wound: Nissan announced Tuesday that it will stop manufacturing its premium Infiniti model at its plant in Sunderland later this year.
It follows a decision earlier this year by Nissan to cancel plans to build its new sport utility vehicles at the plant. The original decision would have created 740 new jobs.
Honda also announced last month it would close its plant in the UK by 2021 causing the loss of around 3,500 jobs.
Brexit is increasingly fraught with uncertainty after the UK’s parliament rejected Prime Minister Theresa May’s Brexit deal for the second time Tuesday.
The impact on the City of London could be especially damaging – financial services, heavily concentrated in the capital, account for 6.5% of Britain’s GDP.
The winner so far has been other European banking hubs. A Frankfurt lobby group has claimed that between €750 billion to €800 billion ($911 billion) in financial assets and claims 10,000 jobs will move to the German city by the time Britain leaves the European Union on March 29.
These moves won’t be undone, even if Brexit were somehow cancelled.
“I don’t believe Brexit can be a trigger for a financial crisis or a banking crisis,” Sergio Ermotti, CEO of Swiss investment firm UBS, told Bloomberg back in September. “But it could undermine investments, and trigger maybe a slowdown in the economy. That’s clear.”
Here’s a roundup of the financial exodus so far:
- US bank giants Goldman Sachs, JPMorgan, Morgan Stanley, and Citigroup have moved 250 billion euros ($283 billion) of balance-sheet assets to Frankfurt because of Brexit.
- Bank of America is spending $400 million to move staff and operations in anticipation of Brexit, and is trying to persuade London staff to move to Paris.
- Barclays last week won permission to shift assets worth £166 billion ($216 billion) to its Irish division. Barclays is set to become Ireland’s biggest bank.
- France’s BNP Paribas, Credit Agricole, and Societe Generale have opted to transfer 500 staff out of London to Paris.
- UBS has chosen German financial center Frankfurt for its new EU headquarters.
- Swiss peer Credit Suisse is moving 250 jobs to Germany, Madrid, and Luxembourg among other EU 27 countries as well as $200 million from its market division to Germany. And in December Credit Suisse told its wealthiest clients to hurry and move their money out of the UK before Brexit.
- Germany’s Deutsche Bank is also considering shifting large volumes of assets to Frankfurt as part of its Brexit plan.
- HSBC, Europe’s biggest bank, has shifted ownership of many of its European subsidiaries from its London-based entity to its French unit.
- Australia’s largest bank by assets, Commonwealth Bank of Australia, has set in motion plans to base around 50 staff in Amsterdam, and has applied for a banking licence in the country.
- Other Australian lenders Macquarie, Westpac, and ANZ are also in talks to move operations to Dublin and continental Europe.
- Europe’s biggest repo trading venue, called BrokerTec, is being moved to Amsterdam from London, meaning a $240 billion a day repo business is leaving the UK.
- More than 100 UK-based asset managers and funds have applied to the Irish central bank for authorization in Ireland.
The impact of these changes will see less tax revenue for the government, fewer jobs, and a dent in dealmaking, taking a shine off the City’s luster.
And that’s just financial services.
A British parliamentary report also recently announced that the UK had lost out on €5 billion ($5.7 billion) in infrastructure funding in the past year.
Schaeffler, a car parts company, is closing two UK factories because of Brexit, leading to 570 fewer jobs.
Among others: There’s a “Brexit-busting” ferry that sidesteps UK trade routes, drug companies are stockpiling medicine, and investors in the once-vibrant UK tech scene are drying up. (A great Twitter thread by a self-described 48%-er in Cambridge lists a wide array of industry impact. You can read it here.)