The delay by a month brings more uncertainty to an already fragile start to a new economic relationship.
More than 400 financial firms in the United Kingdom have shifted activities, staff and a combined trillion pounds ($1.4 trillion) in assets to hubs in the European Union due to Brexit, with more pain to come, according to a new study by the New Financial think-tank.
“We think it is an underestimate and we expect the numbers to increase over time: we are only at the end of the beginning of Brexit,” the study published on Friday said.
The EU has offered the United Kingdom little in the way of direct market access for financial services, which were not included in the bloc’s trade deal with the UK that came into effect in January.
“That access is unlikely to be forthcoming, so it is perhaps better for the industry to take the damage from Brexit on the chin and focus instead on recalibrating the framework in the UK so that it is more tailored to the unique nature of the UK financial services industry,” the study said.
Some 7,400 jobs have moved from the UK or been created at new hubs in the EU, the study said. Bankers have told the Reuters news agency that some staff moves have been delayed due to COVID-19 travel restrictions.
The total of 440 relocations is higher than anticipated and well above the 269 in New Financial’s 2019 survey. New Financial believes the real number is well beyond 500.
Dublin has emerged as the biggest beneficiary with 135 relocations, followed by Paris with 102, Luxembourg 95, Frankfurt 63, and Amsterdam 48.
“This redistribution of activity across the EU has wound the clock back by about 20 years,” the study said.
Banks have moved or are moving more than 900 billion pounds ($1.2 trillion) in assets from Britain to the EU, while insurers and asset managers have transferred more than 100 billion pounds ($138bn) in assets and funds, reducing the UK tax base.
“We expect Frankfurt will be the ‘winner’ in terms of assets in the longer-term, and that Paris will ultimately be the biggest beneficiary in terms of jobs,” the study said.
Amsterdam’s toppling of London as Europe’s biggest share trading centre since January has been the most visible sign of Brexit in finance.
The study expects that 300 to 500 smaller EU financial firms may open a permanent office in the UK, far fewer than the prevailing forecasts of about 1,000.
The City of London will remain the dominant financial centre in Europe for the foreseeable future, but its influence will be chipped away, risking a reduction in the UK’s 26 billion pounds ($35.8bn) annual trade surplus in financial services with the EU, the study added.