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

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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.


Mastercard £14bn ‘overcharge’ legal action fails

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A £14bn class action lawsuit against MasterCard has been thrown out by the Competition Appeals Tribunal.

The former financial ombudsman, Walter Merricks, had claimed that 46 million consumers had been overcharged by MasterCard over a 16-year period.

But the court ruled that the case could not proceed through a collective – or class – action.

The ruling was welcomed by Mastercard, which said the claims were completely unsuitable.

The tribunal found that even if a loss had been suffered, and could be estimated across the whole class, there was no way any individual could receive compensation equal to the loss that he or she had actually suffered.

The case was filed in September 2016, and followed a European Court of Justice (ECJ) ruling against the level of so-called interchange fees – the amounts that retailers have to pay on debit and credit cards.

It related to the fees charged by MasterCard between 1992 and 2008.

“We welcome the Competition Appeal Tribunal’s judgment refusing certification for the proposed collective action,” said a spokesperson for Mastercard.

“As set out in MasterCard’s arguments to date, we believe that the claims were completely unsuitable to be brought under the collective actions regime.”

Interchange fees have since been capped by the European Union.


Carmakers call for transitional EU deal

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The government must secure a transitional Brexit deal to protect the future of the UK car industry, a trade group has said.

The Society of Motor Manufacturers and Traders (SMMT) said Britain was highly unlikely to reach a final agreement with the EU by the March 2019 deadline.

That meant carmakers could face a “cliff edge”, whereby tariff-free trade was sharply pulled away.

It warned the industry would suffer without a back-up plan in place.

The EU is by far the UK’s biggest automotive export market, buying more than half of its finished vehicles – four times as many as the next biggest market.

UK car plants also depend heavily on the free movement of components to and from the continent.

The SMMT said any new relationship with the EU would need to address tariff and non-tariff barriers, regulatory and labour issues, “all of which will take time to negotiate”.

“We accept that we are leaving the European Union,” said chief executive Mike Hawes.

“But our biggest fear is that, in two years’ time, we fall off a cliff edge – no deal, outside the single market and customs union and trading on inferior World Trade Organization terms.

“This would undermine our competitiveness and our ability to attract the investment that is critical to future growth.”

He called on the government to seek an interim arrangement, whereby the UK stayed in the single market and customs union until a new relationship was brokered.

UK car manufacturing generated £77.5bn of turnover last year and accounted for 12% of all goods exports, according to the trade group.

It added that almost a million people were employed across the wider automotive industry.


Brexit negotiations begin: David Davis targets ‘historic’ deal

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Brexit Secretary David Davis will call for “a deal like no other in history” as he heads into talks with the EU.

Subjects for the negotiations, which officially start in Brussels later, include the status of expats, the UK’s “divorce bill” and the Northern Ireland border.

Mr Davis said there was a “long road ahead” but predicted a “deep and special partnership”.

The UK is set to leave the EU by the end of March 2019.

Day one of the negotiations will start at about 11:00 BST at European Commission buildings in Brussels.

Mr Davis and the EU’s chief negotiator Michel Barnier, a former French foreign minister and EU commissioner, will give a joint press conference at the end of the day.

The UK minister, who will be accompanied by a team of British officials, is expected to say: “Today marks the start of negotiations that will shape the future of the European Union and the United Kingdom, and the lives of our citizens.

“We want both sides to emerge strong and prosperous, capable of projecting our shared European values, leading in the world, and demonstrating our resolve to protect the security of our citizens.

“I want to reiterate at the outset of these talks that the UK will remain a committed partner and ally of our friends across the continent.

“And while there is a long road ahead, our destination is clear – a deep and special partnership between the UK and the EU. A deal like no other in history.”

The BBC has been told by European Union sources that the talks will follow the EU’s preferred pattern of exit negotiations first, with the future relations between the two sides – including the free trade deal the UK is seeking – at a later date.

Five major UK business bodies have come together to call for continued access to the European single market until a final Brexit deal is made with the EU.

In a letter to Business Secretary Greg Clark, they urged the government to “put the economy first”.

The letter is from the British Chambers of Commerce, Confederation of British Industry, EEF, Federation of Small Businesses and Institute of Directors.

On the eve of talks, Chancellor Philip Hammond issued a strong warning about the implications of the UK leaving the EU without a deal in place.

Mr Hammond told the BBC’s Andrew Marr Show that having no deal would be “a very, very bad outcome for Britain” but added that one that aimed to “suck the lifeblood out of our economy over a period of time” would be even worse.

He called for a transition deal to be in place to avoid businesses being affected by a “cliff edge” scenario as the UK leaves.

Mr Hammond has said the UK should “prioritise protecting jobs, protecting economic growth and protecting prosperity”.

 


O2 to scrap Europe roaming fees

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From 15 June, O2’s Pay Monthly and Business customers will be able to use their UK plans abroad – in 47 European countries – at no extra cost.

The move echoes the scrapping of roaming charges in similar destinations by EE, Three and Vodafone.

It coincides with the incoming abolition of such fees by the European Union on 15 June.

O2 customers will be able to take their UK plan into some non-EU countries as well.

These include Iceland, Switzerland and Monaco.

When travelling in the Europe Zone outside the UK, O2 customers with the right plans will be able to make calls and send texts to any other country in the zone at no additional cost.

Receiving calls and texts – and using data plans – is also included.

The mobile operator added that customers would not need to take any action to enjoy the benefits of the change.

While the move would certainly benefit some customers, it did not go much beyond what the operator would have to do under the new EU rules, said Kester Mann, a telecoms analyst at CCS Insight.

Brexit time bomb?

Mr Mann added that UK operators might find it difficult to reintroduce roaming fees once the UK left the EU in two years’ time.

“I think it would go down very, very badly with customers – it would be a very bold and perhaps foolhardy option,” he told the BBC.

“It would be very difficult for them to do that just because the UK is such a competitive market and we’ve moved such a long way from roaming.”

Of course, mobile operators had taken a “financial hit” from not being able to charge roaming fees as they had in the past, Mr Mann said.

Instead, they were increasingly trying to recoup that revenue through other means, he added.

For example, some had created higher end packages offering roaming at no extra cost in even more destinations abroad.


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