By John Alexander Adam
Brexit, the term coined to refer to the UK’s potential disentanglement from EU-membership is, as of the
June 23 rd referendum, now a reality in motion. With 51.9% of the electorate of the United Kingdom of
Great Britain and Northern Ireland voting in favor of the country relinquishing its status as a member of
the EU, it is accepted that at some point over the next several months the UK’s government will officially
invoke Article 50 of the Lisbon Treaty. This will officially trigger the process of the UK’s voluntary
withdrawal from the EU. While no one really knows at this stage how the upcoming negotiations will
shape the new relationship between the UK, the EU and the rest of the world, it is almost certain to have
a major impact on the future nature of trade relationships and agreements. One major British industry set
to be particularly affected by Brexit is financial services and its City of London hub. As such, the
international financial industry and its vanguard of CFA-accredited investment professionals is watching
nervously to see how the Brexit fallout impacts business volumes, and therefore jobs, in the UK’s financial
City of London to Lose EU Trade?
While the City of London was certainly a major international finance and trading hub before the existence
of the EU, the world has changed immeasurably over the intervening decades. It is far from certain
whether London can maintain capital volumes passing through its banks and other financial institutions in
the present day, without free access to EU markets.
The EU operates a ‘passporting’ system for financial institutions, which means banks and other financial
services providers can conduct activities across the member-states of the EU from a base in any other.
Over the decades since the formation of the EU, London built upon its initially strong position to become
the locale of choice for global financial institutions doing business across the entirety of the EU.
The City of London’s status as the world’s central hub for the trading of the euro, a market turning over $2
trillion a day, looks to be in particular jeopardy. Last year the ECB failed in a move to stop clearing
houses not located within the Eurozone from handling wholesale euro transactions. The move was
blocked by the European Court of Justice, protecting London’s dominance of the market, a decision
widely considered to have been heavily influenced by the UK’s status as a member of the EU, despite not
being a part of the Eurozone. Any new post-Brexit attempt by the ECB to table a similar motion is unlikely
to meet the same level of resistance and would likely succeed.
London to Relinquish its Crown as Europe’s Primary Employer of CFAs?
Aside from the euro trading market, international banks such as HSBC and JP Morgan have already
intimated that the UK no longer being a part of the EU’s passporting system would negate the logic of
them employing so many staff in London. Roles directly connected to EU markets would have to be
relocated to EU member states with alternative financial centers such as Paris, Frankfurt and Dublin likely
to be amongst the main beneficiaries of such relocation.
With 11% of The City’s financial services professionals coming from other EU member states, any change
in freedom of labor laws post-Brexit would also inevitably result in a brain drain of EU talent no longer
able to easily work in the UK. This would also make London a less attractive base for international
It is expected that job locations would be fragmented between different European bases rather than one
city taking over a dominant role. However, a domino effect of such fragmentation would likely be financial
institutions being less inclined to necessarily base other positions dealing with international non-EU trade
in a London office no longer considered as the European HQ. Some observers have predicted that such a
fragmentation of Europe’s financial services industry would have the knock on effect of it being less
competitive internationally across the board.
International Migration of CFA Jobs – Where Will They Go?
The result of all of the above would be a fanning out around the globe of many of the positions for CFAs
currently concentrated in the City of London. Other European capitals would likely become host to
positions dealing directly with EU markets. What would happen to positions dealing with other
international markets based in London is less clear. Financial institutions may yet decide to keep all or a
part of those positions based in London but for those who don’t the main beneficiaries would likely be the
other established and developing financial hubs. Singapore and Hong Kong in South-East Asia, New
York and the developing financial services industry in the Middle East in cities such as Dubai, would
expect to stand to gain from London’s loss.
Can London Retain Its Position?
The extent to which the potentially seismic changes to the UK’s financial services sector outlined above
come to pass will largely be shaped by negotiations between the UK and the EU over the months and
years after Article 50 is officially invoked. If the UK were to seek to adopt a model mirroring Norway’s and
apply to join the EEA and gain EFTA membership, existing pan-EU regulatory frameworks governing
financial services would remain in place along with the passporting system. This could mean that
London’s position with the international financial services industry would remain largely unchanged.
Alternatively, a UK-EU free trade agreement would give the UK freedom to create its own regulatory
framework for its financial services sector. This would likely result in a patchwork model where some UK-
EU financial trade would remain as currently is with other parts restricted. Pro-Brexit voices have opined
that this kind of arrangement would allow a part of EU-trade focused positions to remain viable as
London-based, with lighter regulation making London a more attractive location for other kinds of jobs
than it is at present.
Time Will Tell
Like the rest of us, London-based CFAs will be finding it hard to as of yet predict the eventual outcome of
Brexit on the British economic and trade model in general, and specifically how that will impact the
financial services industry that is their employer. Until Article 50 is triggered, negotiations get underway
and the UK and the EU outline their positions on how they see their future partnership taking shape we’ll
all, CFAs included have to watch and wait to see how the international FS industry will be reshaped.
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exams from Level I to III with Morgan International. For further information, please contact us!