London’s powerhouse financial sector finds itself at a critical juncture with Article 50 about to be triggered, as the Square Mile braces itself for a jobs exodus and the potential loss of European trading rights following Brexit. City bosses and politicians have called on the UK Government to secure a transitional deal for the industry to prevent companies pre-empting uncertainty by upping sticks to rival financial centres across the globe.
The European Central Bank has made it clear that Britain cannot access the passporting system, which allows financial firms to trade freely across the EU, without remaining a member of the European single market and abiding by its rules, including the free movement of people.
Theresa May cast doubt over firms retaining access through the current system after pledging to pull the UK out of the single market through a so-called hard Brexit, instead pledging to strike a “bold and ambitious” free trade agreement.
Such a move would cost Britain’s financial services sector £38 billion, deal a £10 billion blow to Treasury’s coffers and place 75,000 jobs in the firing line, according to think tank TheCityUK.
Banks have issued the lion’s share of the warnings over job losses, claiming the loss of passporting rights would force them to set up new operations on the continent and migrate staff out of the capital.
US banking giant JP Morgan said 4,000 jobs would leave the UK, Goldman Sachs threatened to move 2,000 roles and HSBC said it would transfer 1,000 positions from London to Paris following the Brexit vote.
It comes as AIG looks to move a string of London-based executives to Luxembourg to head up a new EU subsidiary, while Lloyd’s of London is thought to have also picked Luxembourg as the frontrunner on a shortlist of five sites for a potential a EU operation.
A whole host of other businesses such easyJet, Ryanair and Next have also warned that Brexit could have repercussions.
However, one of the gloomiest assessments of post-Brexit Britain without passporting rights has come from the chief executive of London Stock Exchange Group, Xavier Rolet.
Speaking to MPs in January, he said 232,000 jobs could be lost across the country, including two-thirds outside of London, if Britain was to lose its euro-clearing operation to a rival financial centre.
The EU is said to be mounting a push to try to repatriate euro-clearing to a financial hub on the continent.
However, key financial services, such as euro clearing, are said to be more likely to shift to New York rather than Dublin, Frankfurt or Paris, according to a report by the House of Lords EU financial affairs sub-committee.