Brexit, Meet ‘Banxit’
When Britain announced its decision to formally leave the European Union (EU), it raised a lot of uncertainty. While the decision caused global unsettling, probably the most anxious was the international investment banking community.
Until now, Britain, specifically London, has been the undisputed epicenter of investment banking, next to Wall Street. In fact most top-tier U.S. investment banks housed their international headquarters in London. Now, as Britain enters into formal exit discussions, these banks are beginning to look elsewhere.
Earlier this week, Bloomberg reported that JP Morgan Chase & Co. plans to move hundreds of London-based bankers to Dublin, Frankfurt and Belgium. Then, Reuters recently reported that five top U.S. investment banks had indicated a huge employee shift to Frankfurt. According to the report, JP Morgan, Morgan Stanley, Goldman Sachs, Citigroup, and Bank of America plan to move over 1000 employees to Frankfurt.
Why Investment Banks are Leaving London
While no one has made any sudden movements or signs of jumping ship, the decision to start moving small numbers of employees to outlying EU headquarters is troubling sign for London. Of course, any major decisions depend on the outcome of negotiations between Britain and the EU.
However, Britain’s decision to leave the EU greatly hampered its future as a central hub for international investment banking. Investment banks need to be firmly connected to the EU’s central currency system and relaxed trade regulations for countries of the 28-member bloc.
Britain has been a logical international headquarter for U.S. investment banks due it’s close ties to both the U.S. and Europe. However, it no longer seems like a feasible option.
London’s Future as a Financial Capital?
While a major shift by investment banks elsewhere is unsettling to the U.K. government it shouldn’t be seen as apocalyptic. Geographically, London remains globally-central and is still a major hub for trade and commerce. It may lose its position as the world’s financial capital, but international banking operations are not expected to cease completely.