EY increases UK’s projected Brexit financial asset exodus to £1tn

EY’s estimate of how much financial services companies have committed to move out of the UK and into Europe in the event of a worst-case Brexit scenario has been pushed up to about £1tn, according to the firm’s lates survey.

EY increases UK's projected Brexit financial asset exodus to £1tn

The latest projected figure marks an increase by £200bn on the figure stated in results of EY’s last survey in January.

The £1tn of assets expected to move if things go badly mainly covers client assets and cash moved out of the UK by banks and fund managers as well as the transfer of balance sheets as operations are relocated.



The UK’s finacncial sector’s future trading relationship with the EU remains in question with just days to go until the stated date for Brexit, forcing firms to keep their fingers on the trigger of worst case plans - some of which are still being finalised or remain fluid.

Earlier this month, research from thinktank New Financial has published a report that identified more than 275 firms that have already moved or are planning to move some of their business, staff, assets or legal entities from the UK to the EU in preparation for Brexit.

Meanwhile, the number of jobs likely to move to the continent has remained steady at about 7,000, according to the EY study, which tracks the public declarations of 222 UK-based financial services firms on their intentions to restructure.

About 2,000 new Europe-based roles have already been created since the June 2016 referendum, EY reported. “The relocation of 7,000 high-paid finance jobs will inevitably hit the UK tax base,” said Omar Ali, EY’s head of financial services.

“Even using a conservative estimate . . . the direct loss to the Exchequer from employment taxes would be around £600m. In reality, the average salary and therefore tax loss is likely to be much higher.”

At this stage, only the biggest institutions have made concrete commitments. Three-quarters of the 24 global banks tracked have announced significant relocations of operations to Europe, with Frankfurt the most popular destination with 12 lenders bulking up in the German financial capital. Paris and Dublin are the next most popular with eight and six banks, respectively, EY said.

However, the majority of big banks’ operations remain in London at this point. On Tuesday, US giant Citigroup said its new broker-dealer in Frankfurt was now fully operational and trading for EU clients instead of London, while Bank of America warned there was no going back on the $400m it had already spent leasing offices and moving people to Paris and Dublin.

Similarly, Barclays was given approval by a UK court to move €190bn of assets to its Irish subsidiary because of what a judge called “continuing uncertainty over . . . a ‘no-deal’ Brexit”.

When the entire range of financial firms is considered, the picture is less clear. As of the end of February, only 39 per cent of the 222 surveyed companies had stated their intentions to relocate some operations to Europe, the new survey showed.

The £1tn figure was reached using the statements of the 23 companies, mainly banks, that have already formally announced a shift of assets out of the UK, which means that the “conservative” figure is likely to continue increasing, according to EY. “As the 29th of March draws nearer, no financial services businesses can know for sure how a disorderly Brexit will impact them, their clients, people and supply chains or the UK economy,”

Mr Ali said: “Continued uncertainty will undoubtedly lead to more assets and people being transferred from the UK.”

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