By Saif Ullah, Researcher in the City of London Research Team
Over the last month, several large international banks have begun to provide more details about their location plans post-Brexit. Some of the announcements have arisen partly as a response to the Bank of England’s request for information of banks’ plans should the UK leave the EU without an exit agreement. Major US banks such as Citi and Morgan Stanley both revealed that they would be creating new EU bases in Frankfurt, potentially involving some staff moving from offices in London, while Bank of America announced that it had selected Dublin as its post-Brexit EU hub. Several Japanese banks, such as MUFG, Nomura, Daiwa and SMFG have also recently revealed plans to set up new offices or subsidiaries in other EU states (all plan to base EU operations in Frankfurt, with the exception of MUFG which will reportedly expand its Amsterdam office).
In the Research team, we’ve been closely monitoring firm movement announcements of financial and professional services firms over the last year. More recently, we’ve been looking at the implications of large bank’s moving staff away from the City to other locations and what they stand to lose as a result.
So far, it is unclear how many bank employees could leave firms in London and the City. While it is more than likely that there will be a number of staff relocations abroad, many banks have yet to lay out specifics on the potential number of moves, given the uncertainty over how Brexit negotiations may develop. Actual numbers of confirmed staff moves are currently at the lower end (500-600), but recent estimates from Oliver Wyman suggest that as many as 40k employees from wholesale banking alone could eventually leave the UK as a result of Brexit.
Yet several factors may dictate whether large banks keep the majority of their employees in London, and more specifically the City. One of the key motivations for banks to keep staff in London is the attractiveness of the capital as a place to live and work, a factor recently highlighted by the City Corporation’s Policy Chairman.
Another key factor is that banks benefit from being based in the City given the strong mutual dependency between financial services firms, professional services and tech firms. Fiona’s blog last week illustrated some of the key business demand relationships between financial services and other IT and professional services sectors in the UK, with FS accounting for over a quarter of business demand for telecoms, 22% of demand for computer programming services, 17% of demand for legal services, and almost a third of demand for head office activity and management consultancy.
With proximity to clients and customers being a major factor in firms’ location decisions, it stands to reason that major banks choose to locate in the City given the immediacy of partners in other related sectors, whose services they require. In addition, the City’s dense business cluster allows such firms to benefit and recruit from a large pool of specialist, skilled workers.
This links neatly on to my final point – the importance of the UK’s workforce to large banks’ and the availability of skilled workers in London and more widely. As Laura highlighted in a blog published earlier this year, large financial service firms employ huge numbers of workers in the UK, and large banks in particular are dominant in terms of banking employment numbers – 80 very large banks (500+ workers) employ 84% of bank workers in the UK.
The same is true of large banks based in the City. The City accounts for 16% of banking employment in the UK and has the highest concentration of banking jobs in London (58k compared to 46k in Canary Wharf). Nine of the largest global investment banks are based in the City, employing over 29k people, more than 50% of banking jobs in the City. Large banks are reliant on significant worker numbers across the UK and in the City specifically, and this mix of talent is not something that can be readily replaced or transferred to other vicinities.
The current wave of media reports concerning bank staff moves suggests that there could be an exodus of City workers on the horizon. However, the benefits of a City location for banks in terms of access to required services, attractiveness as a location, and depth of talent, remain significant. Recent commitments from the likes of Deutsche Bank to maintain a major presence in the City suggest that whatever happens, large banks will recognise the capital as a prime location for years to come.
 Based on the City Corporation’s internal FS firm movement tracker
 ONS, Business Register and Employment Survey, October 2016