According to a report by consultancy firm Oliver Wyman, the UK could lose 40,000 investment banking jobs unless the government agree on a softer departure deal from the EU.
Major banks including HSBC (LON:HSBA), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C) and Barclays (LON:BARC) have all indicated towards plans of moving jobs and operations out of London before the UK officially leaves the bloc in 2019.
Oliver Wyman has said that a hard Brexit will “fragment the European wholesale banking market. It will also make it significantly less profitable.”
The Centre for London also said last month that up to 70,000 roles could be relocated from the City of London when the UK leaves the EU.
Matt Austen, UK head of financial services at Oliver Wyman, said: “The banks are working on ‘no regrets’ moves, which increase options but don’t cost that much either to undertake or to reverse,”
“Once you get to the point of putting balance sheet and capital into an entity, it becomes more committed. The economics really start to bite when banks start to deploy financial resources.”
The consultancy firm has said that Britain currently employs 80,000 people in the wholesale banking sector – half of these jobs could move elsewhere in the next few years.
Initially, up to 20,000 jobs will move from the UK but this figure has the potential to double due to issues such as clearing.
According to banking executives, major lenders are holding off making the concrete plans to move a large number of jobs until they know for sure that Britain has failed to negotiate a favourable deal.
“Most are looking to minimise expense and disruption by relocating as little as possible in the first instance,” said Oliver Wyman.
“If you want to move people in advance of March 2019, realistically, the latest you can afford to wait is next summer, maybe even sooner,”
“There is a risk that banks’ capital needs could be higher still, for example if they fail to achieve sought-after regulatory treatment (from European Union regulators) on issues such as internal model approvals and the treatment of large inter-company exposures.”
“Given that returns on equity in European wholesale banking are already below hurdle for many players, these new challenges from Brexit will raise difficult questions about the viability of some activities over the medium term,” the consultancy continued.
“Some banks may even choose to withdraw capacity from the European market as a whole and redeploy to other regions, such as Asia or the US.”