London to lose 30,000 jobs over Brexit, says think tank

London could lose 30,000 jobs to the “EU27” following a hard Brexit, according to estimates from European think thank Bruegel.

The job losses would result from the withdrawal of passporting rights for UK-based financial firms, leading to the partial migration of these firms to the EU27 (EU minus the UK) from London in order to continue serving clients in EU countries. From the 30,000 estimate, 10,000 jobs involve core wholesale banking, while 18,000-20,000 relate to professional services.

In addition, the report estimates that 35% of London wholesale banking is related to EU27 clients, potentially leading to €1.8tn (£1.5tn) of UK banking assets moving out of London post-Brexit.

Four European cities – Amsterdam, Dublin, Frankfurt and Paris – are in line to host the migrated firms but, with fewer finance employees and fewer European headquarters of large companies currently located there, the migration will “have a major impact on these cities and their infrastructures”, the report said. Frankfurt is likely to take 45% of the EU27 wholesale market, with Paris claiming 20% and Dublin and Amsterdam covering 15% and 10% respectively.

Yet, Brexit “creates an opportunity for the remaining EU27 to accelerate the development of its financial markets and to increase its resilience against shocks”, said the report. It recommended moving “quickly towards a fully integrated single market for financial services, with harmonised rules and consistent supervision and enforcement”. This integration would reduce the need for “all activities to move to one location”, relieving pressure to house all facilities, including infrastructure offices and residential buildings, in one city. Resulting in “a more geographically spread industry”, Frankfurt would take 35% of wholesale finance, with Amsterdam, Dublin and Paris each having 12-20%.

The challenge for the EU27 is to minimise risk to market integrity and stability, particularly as the EU, including the UK, “has been crucially dependent on the Bank of England and the UK Financial Conduct Authority for oversight of its wholesale markets”.

“Losing even partial access to the efficient London financial centre could entail a loss of efficiency for the EU27 economy, especially if financial developments inside the EU27 remain limited and uneven,” the report said.

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