Capital Gains Outside The City

More than 440 financial services firms in the UK that are relocating part of their business, staff or legal entities to the EU due to Brexit.

Deutsche Bank’s decision to move a portion of its corporate banking division from London to the EU and Asia follows similar relocations, as the UK’s failure to secure provisions on equivalence for financial services as part of the EU-UK Trade and Cooperation Agreement threatens the City of London’s longstanding role as Europe’s chief financial hub.

The UK has time-limited equivalence in just two areas: clearing and settlement. “This is worse than our expectation that the EU would offer equivalence in clearing, settlement, share trading and derivatives trading, as well as a suite of more technical/less controversial areas of equivalence,” says William Wright, founder and managing director of think tank New Financial.

A recent New Financial report, Brexit & The City: The Impact So Far, identified more than 440 financial services firms in the UK that are relocating part of their business, staff or legal entities to the EU. That amounts to £900 billion ($1.3 billion) in bank assets—roughly 10% of the entire UK banking system.

Dublin has emerged as the winner in attracting business from the UK, with 135 firms choosing the Irish capital as a post-Brexit location. That represents 25% of all the company moves that New Financial identified, followed by: Paris (102), Luxembourg (93), Frankfurt (62), and Amsterdam (48). “We expect these numbers to increase significantly in the next few years,” Wright concludes.

No single financial center has emerged to replace The City’s former dominance. Many companies have chosen to split their businesses, choosing separate cities as hubs for different divisions.

“We identified nearly 70 firms that are expanding in other EU cities in addition to whichever center they have chosen as their main post-Brexit hub,” Wright says. A third of all relocating asset management firms have chosen Dublin, while 60% of the firms that have chosen Frankfurt are banks. Nearly two-thirds of firms moving to Amsterdam are trading platforms, exchanges or broking firms. 

Paris, which has less of a sector focus, is positioning itself as a mini-London. “In the longer term,” says Wright, “we expect Frankfurt to be the winner in terms of assets, and Paris in terms of jobs.”