Bankers based in London are anxiously awaiting news on how their employers are planning to position themselves, as the outlook for the UK becomes clearer following the June 23 vote to leave the European Union.
Earlier this week, Bloomberg reported that banks might be accelerating their plans for moving jobs from the UK to France and Germany post-Brexit.
However, the number of suitable destinations is limited and there are likely to be many regulatory issues to deal with.
Raoul Ruparel, co-director of Open Europe – a think tank that focuses on the situation for the UK following the EU referendum – says transferring large numbers of FX staff to France in particular will not be a straightforward process.
“Culturally and socially, France has taken a different approach to the UK in relation to this type of business in recent years,” he explains. “It remains to be seen whether they have the appetite to offer tax or regulatory incentives.”
James Coiley, a partner at law firm Ashurst, observes that Paris is disadvantaged by French employment and personal tax regimes.
“Politics will also have an impact,” he says. “Making overtures to FX banks and traders to relocate to Paris may not play well with supporters of the socialist French government.”
And according to Andrew Kitchen, internal audit manager at recruitment consultancy Morgan McKinley, there has been no increase in the number of people from the leading banks looking to leave the UK since the EU referendum.
“What we are seeing is that several candidates based in Europe who had hitherto been looking to relocate to London are now staying put,” he says. “This is in part due to the level of uncertainty around future Brexit implications, but also the current weak value of the pound.”
Kitchen says the volume of internal audit roles within the capital markets audit teams has increased since the June 23 vote, adding: “In the seven-week period following the referendum, we saw an increase in job flow of 71% compared to the seven weeks preceding the vote. Many of these jobs have been within the specific FX audit teams.”
Banks have considered contingency options to move some people to other European cities in a Brexit worst-case scenario, but the further they get from the referendum date the more those fears seem to have subsided, suggests Canice Hogan, CEO and founder of Shadowhound, another specialist recruiter.
“At the margin we hear that a minority of roles could be redeployed elsewhere over the long term as part of the risk mitigation process, but the execution of this strategy is not without its challenges, especially considering some of the local contract idiosyncrasies in locations such as Paris and Frankfurt,” he says.
According to Hogan, the term ‘Brexcuse’ has been overheard on more than one occasion as a reason for not going ahead with recruitment, although he accepts there will probably be a small minority of roles that involved exploratory meetings or speculative headcounts that will be postponed in the short term.
“We haven’t seen any signs of a knee-jerk reaction from the FX banks, although it is fair to say that the trend for people looking to leave European banks for US rivals remains intact,” he adds.
“There is not a lot of job liquidity, though, so trends take longer to materialize. There is not usually an option to switch right away.”
Moving but not leaving
A reduction in headcount has increased the number of people looking for FX jobs and some of these candidates have moved from banks to FX platforms or fintechs as the market has diversified, adds Neil Price, managing partner at Michael Williams Associates, a financial markets recruitment firm.
|James Coiley, Ashurst|
“However, we are not seeing candidates looking to leave the industry or any significant change in hiring post-Brexit,” he says. “If anything, it has picked up a little as things were on hold prior to vote.
“The outlook for 2017 remains unclear, although we are getting the sense that firms are becoming more positive.”
This view is shared by Morgan McKinley’s Kitchen, who says there are few factors that would persuade the leading FX banks to move staff out of London.
“At first glance, Brexit implies the banks and brokerage firms will have to get regulated by another EU member country, but that shouldn't prove to be too great a hurdle — indeed, the FCA’s regulatory framework is the model on which the rest of the EU base their own regulatory requirements,” he concludes.
“Equally, other European cities simply don't have the infrastructure in place to accommodate staff relocation on any sizeable scale.”