Bank of England believes Brexit could cost 75,000 finance jobs

Posted on by CCKeith in Uncategorized Comments Off on Bank of England believes Brexit could cost 75,000 finance jobs

The Bank of England believes that up to 75,000 jobs could be lost in financial services following Britain’s departure from the European Union.

I understand senior figures at the Bank are using the number as a “reasonable scenario”, particularly if there is no specific UK-EU financial services deal.

The number could change depending on the UK’s post-Brexit trading relationship with the EU.

But the bank still expects substantial job losses.

Many jobs will move to the continent.

The Bank of England has asked banks and other financial institutions, such as hedge funds, to provide it with contingency plans in the event of Britain trading with the EU under World Trade Organisation rules – what some have described as a “hard Brexit”.

That would mean banks based in the UK losing special passporting rights to operate across the EU.

The EU could also impose other “locations specific” regulations such as where trading in trillions of pounds worth of euro-denominated financial insurance products has to be based.

That could mean trading jobs moving to Paris or Frankfurt.

There have been a number of studies on the potential employment impact of Brexit.

A poll of more than 100 finance firms by Reuters suggested the number of job losses would be just below 10,000 in the “few years” following Brexit.

I understand the bank believes the 10,000 jobs figure is likely on “day one” of Brexit if there is no deal.

The Brussels-based think tank, Bruegel, said that over time 30,000 jobs could move to the continent or be lost as London’s financial sector shrinks.

And Xavier Rolet, the chief executive of the London Stock Exchange, has suggested that over 200,000 jobs could go.

The bank believes that is too high, and its scenario over the next three-to-five years is much closer to the 2016 study by Oliver Wyman, a management consultancy which has often been quoted by banking lobby groups assessing the impact of Brexit.

Their report suggested between 65,000 and 75,000 job losses.

The study said that up to 40,000 jobs could be lost directly from financial services, with a further 30-40,000 going in associated activities such as legal work and professional services.

The report also argued that there could be opportunities from Brexit, such as developing bespoke financial services for emerging market economies across the Middle East and Asia including China and India.

Even if 75,000 jobs do go, London would still be by far the largest financial centre in Europe with over one million people employed in financial services in the capital and across the rest of Britain.

And the UK would still enjoy a healthy trade surplus in financial services with the rest of the EU worth many tens of billions of pounds.

Many also believe there will be a positive outcome to the EU negotiations as the City supports many governments and businesses on the continent in raising funds and executing global deals.

Those companies and firms would want to keep a close relationship with the UK and its well-developed global markets capacity.

Before the referendum, many banks suggested that they may move thousands of jobs.

But since then announcements have been more modest.

JP Morgan said it might have to move 4,000 jobs, but since the referendum has cut that number to around 1,000.

The Swiss bank, UBS, said it may move as few as 250 jobs after initially planning to relocate as many as 1,000.

And the chief executive of Barclays, Jess Staley, said that Brexit was no more complicated than setting up a holding company in America, which the bank was obliged to do in 2016.

More recently Lloyd Blankfein, the chief executive of Goldman Sachs, has tweeted that he will be spending “a lot more time” in Frankfurt despite the American bank building a large new HQ in London.


Currency rates hit new low at airport bureaux de change

Posted on by CCKeith in Uncategorized Comments Off on Currency rates hit new low at airport bureaux de change

Travellers buying their currencies at UK airports are being offered as little as 86 euro cents to the pound.

Foreign exchange broker FairFx, which carried out a survey for the BBC, said this rate, from Moneycorp at Southampton airport, was the worst at any airport bureau de change.

The average euro rate across 16 big UK airports was higher, at 95 euro cents to the pound.

Ten months ago the average at these outlets stood at 99 euro cents. James Hickman, chief commercial officer at FairFX, said the fact that airport rates are so low – much worse even than at High Street banks – shows that the bureaux de change firms are taking advantage.

“In reality they are ripping off the customer, who is effectively captive as they have nowhere else to buy their money at an airport,” he said.

“At most airports and terminals individual companies have a monopoly.

“They should be regulated as there is simply no justification for charging someone 14% [the average margin between the tourist and money market rates] to change their pounds to euros,” he added. That margin is as high as 26% at Moneycorp’s Southampton airport outlet.

Pauline Maguire, Moneycorp’s retail director, said: “The reason for our higher airport rates is the significant cost associated with operating there – from ground rent and additional security, to the cost of staffing the bureaux for customers on early and late flights.”

“An easy and more cost-effective way for customers to buy travel money is to pre-order online and collect at the airport,” she said.

The best euro rate for tourists detected in the airport survey was 1.05 euros, from Travelex at Newcastle airport.

Wide variation

The average tourist rate for the pound against the US dollar is also very low.

Currently the average is $1.12 to the pound at UK airports, ranging from $1.05 at ICE at Norwich airport to $1.15 from Travelex at Heathrow Terminal 3.

Koko Sarkari, chief executive of ICE, which runs bureaux de change at Belfast, Birmingham, Heathrow and Luton airports, dismissed the idea his firm was exploiting a captive market.

“We work hard to keep our prices fair and competitive around the world,” he said.

“However, due to differences in distribution, costs of operation, regional competition and other factors such as ongoing volatility in the market, as we are experiencing now, online prices may not be the same as our ICE branch prices and prices may also vary between branches because of these factors.”

‘Brexit uncertainty’

One reason for the poor rates on offer to tourists is the continued decline of the pound on the foreign exchange markets, in the wake of last year’s Brexit vote.

The pound’s money market rate – the one at which banks buy and sell to each other – has dropped from $1.31 to $1.29 in the past 12 months.

Against the euro it has dropped much more in that time, from 1.18 euro to 1.08 euro.

Continuing Brexit uncertainty is feeding into sterling weakness, said Simon Derrick, a managing director at BNY Mellon.

Traders are looking to see what will happen over the next two months, with the attempted incorporation of EU law into UK legislation through the Great Repeal Bill, and EU negotiator Michel Barnier reporting back to the European Parliament on Brexit talks.

Sterling also hasn’t done that well in August after the Bank of England monetary policy committee voted to keep rates on hold – investors see no prospect of a rates rise any time soon, he said.

However, there are two sides to the story. The euro is also getting stronger because “the eurozone economy is really starting to show some signs of life,” he said.

Eurozone consumer confidence seems to be picking up, and investors think the ECB will start to tighten monetary policy as inflationary pressures build.


Brexit: Keep single market for transition period – Labour

Posted on by CCKeith in Uncategorized Comments Off on Brexit: Keep single market for transition period – Labour

Labour would keep the UK in the EU single market and customs union for a transitional period after leaving the EU, the party has said.

Shadow Brexit secretary Sir Keir Starmer set out Labour’s new position in the Observer.

The shift in policy would mean accepting the free movement of labour after leaving the EU in March 2019.

Sir Keir said the transition would be “as short as possible but as long as necessary”.

Meanwhile, Brexit Secretary David Davis urged the European Commission to have a flexible approach to talks.

Labour’s leadership has been criticised by opponents for a lack of clarity on what deal Britain should seek immediately after the EU.

Sir Keir said a transitional period was needed to avoid a “cliff edge” for the economy, so that goods and services could continue to flow between the EU and UK while complex negotiations on the permanent deal continued.

“Labour would seek a transitional deal that maintains the same basic terms that we currently enjoy with the EU,” he wrote.

“That means we would seek to remain in a customs union with the EU and within the single market during this period.

“It means we would abide by the common rules of both.”

‘Unlimited migration’

He compared this with the government’s preference for “bespoke” transitional arrangements, which he said were highly unlikely to be negotiated before March 2019.

He did not say how long the transitional period would be – only that it would be “as short as possible, but as long as is necessary”.

The customs union is the EU’s tariff-free trading area, while the single market also includes the free movement of goods, services, capital and people.

“Those who campaigned to leave the EU are likely to be concerned that this could see unlimited migration continue for some time after Brexit,” said the BBC’s political correspondent Iain Watson.

After the transitional period, Sir Keir said, the new relationship with the EU would “retain the benefits of the customs union and the single market”, but how that would be achieved “is secondary to the outcome”.

Remaining in a form of customs union with the EU was a “possible end destination” for Labour, he said, but that must be “subject to negotiations”.

“It also means that Labour is flexible as to whether the benefits of the single market are best retained by negotiating a new single market relationship or by working up from a bespoke trade deal.”

He said a final deal must address the “need for more effective management of migration”.

Party leader Jeremy Corbyn’s office confirmed that the proposals had been agreed with him and were official policy.

TUC general secretary Frances O’Grady said it was a “sensible and reasonable” approach to take, and would give working people “certainty” on their jobs and rights at work.

But Liberal Democrat Brexit spokesman Tom Brake said it was “all spin and no principle”.

‘Temporary customs union’

The government has also called for a transition period to help business adjust after Brexit.

But chancellor Philip Hammond and trade secretary Liam Fox said the UK would be “outside the single market and outside the customs union” during this period.

A paper subsequently published by the government said it could ask Brussels to establish a “temporary customs union” after March 2019.

But during this period, it would also expect to be able to negotiate its own international trade deals – something it cannot do as an EU customs union member.

Meanwhile, Brexit Secretary David Davis will meet the European Commission’s chief negotiator Michel Barnier on Monday to formally open Brexit discussions.

The government said this week’s negotiations were “likely to be technical in nature”, ahead of more substantial talks in September.

It said both sides must be “flexible and willing to compromise” when it comes to solving areas where they disagree.


Crawford Falconer takes up post as UK’s top trade negotiator

Posted on by CCKeith in Uncategorized Comments Off on Crawford Falconer takes up post as UK’s top trade negotiator

Crawford Falconer takes up post as UK’s top trade negotiator. The man in charge of negotiating the UK’s trade deals once Brexit is finalised, starts his job this week.

Crawford Falconer will take up the post of chief trade negotiation adviser at the Department for International Trade.

Leaving the single market would mean the UK would have to establish new bilateral trade agreements, but cannot formally do so until after Brexit.

However, one economist suggested Mr Falconer would already be “building bridges” with the European Commission.

The UK faces a huge challenge in resetting its trading relationship with the EU and other countries when Brexit takes effect.

Trade pacts that have been negotiated by the EU with the rest of the world will no longer apply to the UK, while Britain will also need to define new trading relationships with the EU itself.

Membership of the EU has meant the UK does not have a large bank of trade negotiators with recent experience.

Prof Alan Winters, from the University of Sussex’s UK Trade Policy Observatory, said Mr Falconer’s experience and contacts at the WTO would mean the groundwork for separating UK trade policy from Brussels would be made easier.

“He knows quite a lot of the main players at the WTO and can build bridges at the European Council, which is good as there is work to be done right now,” he said.

“There is work he can do, such as discussions on whether the UK uses replicas or changes trade agreements that we have with nations by way of membership with the EU.”

One suggestion has been that initially trade agreements could be adopted by the UK in their current form – replicating them – at the point of Brexit, to be altered subsequently as new deals are agreed.

International Trade Secretary Liam Fox said of the new appointee: “Crawford Falconer brings a wealth of international trade expertise to our international economic department, ensuring that as we leave the EU, the UK will be at the forefront of global free trade and driving the case for international openness.”

Mr Falconer will lead trade policy and negotiation teams at the DIT. His appointment was first announced in June.

A New Zealander, Mr Falconer has more than 25 years trade experience. He has represented New Zealand at the World Trade Organization (WTO) and held various posts in foreign and trade affairs in his home country.


Bank of England says Brexit transition desirable for UK, EU banks

Posted on by CCKeith in Uncategorized Comments Off on Bank of England says Brexit transition desirable for UK, EU banks

The Bank of England said a transition period after the Britain leaves the European Union would give banks more time to make orderly changes as Brexit poses risks to financial stability.

With UK due to leave the bloc in March 2019, the BoE’s Prudential Regulation Authority (PRA) said it faces heavy demands from Brexit fallout on banks and insurers.

BoE Deputy Governor and PRA Chief Executive Sam Woods said “some form of implementation period is desirable” between Britain leaving the bloc and start of new trading terms to “give UK and EU firms” more time to make necessary changes.

But he stopped short of saying what sort of transition he wanted in a reply to Nicky Morgan, new chair of parliament’s Treasury Select Committee, who asked him this month for his views on the design of such a period.

The UK government has not presented the EU with any firm request for a transition period as it still seeks internal consensus.

UK-based firms are not waiting for clarity and are announcing new hubs in the EU27 to be sure of serving customers there after March 2019 – and avoid the destabilising ruptures in financial links the BoE fears.

Woods had asked banks to spell out how they would cope in particular with a “hard” Brexit where Britain crashes out of the EU with no transition or trading deal.

In a letter to Morgan made public on Wednesday, he said 401 responses were received, which revealed “significant issues for many firms” and the BoE will reach a view on the plans in the autumn.

The submissions provided “further evidence” of risks the BoE had already identified, specifically relating to the continued servicing and performance of existing contracts and restriction on data transfers.

There could be a sharp rise in the number of insurance policies shifted from one country to another, a switch that involves the courts, he said.

“Re-structuring by firms to mitigate risks to their business will in general increase complexity.” Dislocation and fragmentation of markets could bump up costs and cut activity.

The BoE will need to ensure that supervising firms with links between the EU and a Britain outside the bloc, is still doable, he added.

The PRA faces having to authorise and supervise a significant number of additional firms, which could place a material extra burden on resources, Woods said.

London is home to branches of banks from continental Europe and they face having to become subsidiaries, meaning they would be directly supervised by the PRA.

Woods said the issues set out in his response to Morgan “pose a material risk” to the PRA’s objectives as a supervisor, and that this work is a top priority.

“It is incumbent on us to manage this burden but we may have to make some difficult prioritisation decisions in order to accommodate it,” Woods said.


Switch to mobile version