July 9, 2018 / 4:09 PM / a month ago

Breakingviews - UK counts cost of finance jobs which never come

LONDON (Reuters Breakingviews) - Fans of England’s soccer team are used to reflecting on what might have been following decades of national disappointment. Such regret is only just beginning for London’s financial services industry. The news that BlackRock has chosen to establish its European alternative investment business in Paris rather than the British capital indicates that one of the big costs of leaving the European Union will be those new businesses which will simply pass the City by.

Office blocks of Citi, Barclays, and HSBC banks seen at dusk in the Canary Wharf financial district in London, Britain November 16, 2017. REUTERS/Toby Melville

The U.S. fund management giant picked Paris for its alternative investment hub – which will sell commodity and hedge fund products to clients in Europe and Asia – after months of lobbying by business-friendly French President Emmanuel Macron. London will remain BlackRock’s main European base, and the new business will be staffed by new hires rather than UK workers relocating across the English Channel.

Even so, the shift underlines London’s relative loss of attraction as a destination for investment by banks and asset managers. Britain attracted 78 cross-border financial services investments last year, according to EY research, down 26 percent year-on-year. By contrast, investments in Germany and France rose by 64 percent and 123 percent, respectively.

Leaving the EU will drive up the cost of doing business in Europe for asset managers and investment banks, which lose the ability to sell products into the EU from London. As a result, transfers to the continent are accelerating: 1,600 jobs have been earmarked to move in the two years since the Brexit referendum, according to data from the City of London Corporation. Four months ago, the figure was just 725.

That’s barely a dent on London’s 396,000-strong financial industry. At present, banks say that new jobs in the European Union will mostly consist of beefing up local hires rather than relocating large numbers of employees – though that could change if Britain leaves without a deal at the end of March next year. But in the future, when looking to add to European teams, the emphasis will be on cities such as Frankfurt, Paris or Amsterdam.

London’s claims to be Europe’s unrivalled financial centre claims will be diminished, and the City’s financiers will rue what might have been.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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