City To Lose At Least 5000 Jobs Courtesy Of Brexit
Opponents of Brexit point, very reasonably, to the fact that nobody who voted for Brexit voted to be poorer. Voters were promised that leaving the EU would unleash a financial bonanza which could boost NHS coffers to the tune of £350 million per week (or more); that the UK held “the best cards”; that leaving the EU didn’t mean leaving the single market; and that nations would be beating a path to the British door to negotiate “jumbo” free-trade deals – the agreement of a comprehensive free-trade deal with the EU being “the easiest deal in history”. Alas, reality has turned out to be not quite as rosy.
Financial houses find the UK an attractive base for their businesses not least because it means that they can trade freely across the EU – just as if they had a physical presence in the partner country. This facility is known as “passporting” and will end when the UK leaves the EU. Consequently, if these firms wish to be able to continue their “passporting” activities, they will be forced to set up a sufficiently large presence in one of the remaining EU-27 states. Inevitably, this will cause job losses in, and capital flows from, the UK.
The Bank of England is predicting that 5000 or so jobs will be lost in the UK financial sector by the Brexit date (29/3/19), a figure not disputed by government. The City minister, Jon Glen, told a Lords Committee: "We have not seen wholesale moves of large institutions to other cities in continental EU. My sole objective in respect of the City is to ensure as much continuation as possible in respect of economic value able to be generated by the City". He conceded that the extent of job losses would depend on the deal that the UK reaches with the EU and would be worse in a “no deal” scenario. That may not be true since the PM’s Chequers plan, which she insists is the only workable Brexit solution, does not cover the UK service industry (including the financial sector). Glen further conceded that the Treasury has not calculated the tax loss from financial services that will be relocating part (or all) of their activities outside the UK.
"It would be pretty impossible, laden with so many assumptions, to do some meaningful calculations on that, in terms of what the different sectors' response would be, because there's so many live issues with respect to the deal and the regulatory certainty that we would seek to bring through the deal," he said.
According to the minister, the government is trying to secure a bilateral agreement with the EU on regulatory equivalence. As a member of the single market, the UK is already aligned with EU regulations, so the agreement would need to cover scenarios in which the two parties were to diverge in the future. The UK financial sector contributes £70 billion to the exchequer annually.
Glen told the committee that: "We cannot be subject to a situation where there is politicisation of equivalence and our financial institutions would be vulnerable. We need an outcome that satisfies the City".
Naturally, it was outside his remit to say what would happen if such an outcome could not be obtained.