This chart comes from the latest IMF Global Financial Stability Report:
As the IMF notes:
The transition to a post-Brexit world [will] need to be carefully managed to minimize disruption in market services and activities, and maintain a sound and effective supervision of financial activities. Because operating costs may increase during the transition as banks may have to duplicate operations and relocate staff, many banks have begun to draw contingency plans and explore various relocation alternatives. Some institutions may even opt to exit or scale back specific business lines.
To out it another way, Brexit will cost vastly more than any financial transaction tax might and jobs will go.
Have no doubt that no deal would be very bad for those in the UK who will bear the burden of another major downturn of the sort Theresa May seems to be engineering. The people in question are not bankers, of course.
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Oh, I think the computers in The Bahamas, The Cayman Isles, The Virgin Isles etc. will be able to cope. One big problem is the pension funds for all those admin’ persons in Brussels.
There aren’t that many of them…..
Despite the runours
The banking jobs can bugger off without to much impact-let’s remember that these people are largely ‘wealth shufflers’ that contribute not only nothing to social purpose but detract from it. see: http://www.theguardian.com/business/2009/aug/27/fsa-bonus-city-banks-tax
It will be a question of whether Government policy is able to offset the banks scurrying around like scared ants. We know the Banking sector has operated as a wealth siphoner during the neo-lib era, it will really be a question of Government policy creating the right changes that increase public confidence and loosen up the constipation of austerity.
We don’t need the banks renting out the currency when Government can issue it without siphoning it back.
As for the IMF its forecasting record is dire.
The IMF was not forecasting here: this is data
But I agree with you (and Adair Turner); much of this activity is useless rent seeking
You might want the banking jobs to “bugger off” and I know that those on the left people love to hammer bankers but it might be worth remembering that most of them are still human beings! Very few are super-rich and making millions each year.
Take JPMorgan’s Bournemouth office. It’s the biggest private employer in Dorset, offering good pay and working conditions to over 4,000 people involved in back-end settlements and IT. Very few, if any in these roles are earning millions, most are earning say £40-80k. Frankly, it won’t be the high-paying, but far less numerous, jobs in M&A or trading that will need to be transferred into Europe on a hard Brexit. Instead it will be the vastly more common roles in areas like settlements that will be moved. The economy of a place like Bournemouth could be severely damaged if JPMorgan needs to relocate to Dublin, Paris etc.
Note I don’t work in banking or live in Bournemouth but I do know some who do and they are pretty concerned about the potential loss of their jobs or the need to relocate away from family/friends etc.
Many of those people are highly numerate and bright. Wouldn’t it be good if we could use their skills in more socially useful ways that shuffling other peoples’ money around? Their skills needn’t go to waste.
Perhaps these people, essential to operations and employment here, will simply be renamed as, say, Mode 4 transnationals, and carry on as normal, allowing May(hem) to stoutly declare she’s removed all the immigrants while City business goes serenely on. If the Tories can contemplate conquering poverty by the simple expedient of redefining it so it no longer includes people who don’t have any money, all is possible 🙂
I assume you are referring to the Dominic Raab reference to food bank users having nothing to do with ‘poverty’ but only a temporary ‘cash flow problem.’
No, IDS ” As others have pointed out, the government is trying to say that being poor isn’t about not having enough money.” http://touchstoneblog.org.uk/2015/07/iain-duncan-smith-tears-up-the-child-poverty-act-and-tells-us-hes-going-to-improve-it/
I don’t like the fact that even people in banking will lose their jobs if this goes badly (as seems likely). It will be the younger and more lower paid people in banking that will lose their jobs.
It will be even worse if the wider economy also suffers a downturn and there
are less jobs in the economy to soak up job losses in the City. Also, for those living in the expensive south east – loss of income is going to catastrophic.
It all adds up to human misery in the end. It would be nice to think that out of it we will have policies to help retrain people and have a real ‘march of the makers’ next time around and rebalance the economy.
But if May gets in I cannot see this happening at all.
May’s sole intent seems to be to create not Heaven but a Hell she can reign in. However, if people by and large are stupid enough to let her do this then there’s not a lot to be done except concentrate on individual survival. I speak as a single man, of course.
PSR, the banks are shedding jobs like billio at present with branches closing all over the place:
http://www.sharecast.com/news/rbs-to-shed-158-branches-along-with-400-jobs-as-digital-banking-rises/25717662.html
http://www.thenorthernecho.co.uk/news/14647681.Lloyds_Bank_to_shed_3_000_jobs_and_close_200_branches/
I have been exchanging e-mails with my stockbroker ( yes I know). They seem to be taking the approach of “wait n see” – which worries me a bit. Two things:
a) how will Breixt affect the ability to purchase shares traded on other exchanges. At the moment a UK-based broker has a trading relationship with a Paris-based broker, for example. All nice & open & easy.
b) working on the basis that the £ will tank (= parity with $/Euro +/- 2 years probably less) then I’m starting to wonder about exchange controls – which Thatcher removed in 1979 through an “Order in Council” & which could be re-implemented in minutes through the same route.
Also – lots of corporate bonds denominated in sterling & traded through London – be interesting to see how that works out. Still with the toilet-paper lady in charge (strong n stable) I’m sure it will all be ok (snigger).
Thank you for bringing this to our attention Richard.
I had in the past rather thought that these bankers performed no vital function and that if they all left because of a rise in income taxes then it was a case of good riddance. It would be a sad irony if because of Brexit these same bankers left then it would be a bad thing.
Perhaps if they stay anyway after Brexit we could introduce a widening of those advance payment notices where we decide what a fair amount of tax that they ought to pay and then they have to pay it. That way if they do leave the UK it will be for the right reasons.
Thank you Richard for all you do.
To all those commentators celebrating the mass exodus of the financiers:
You might not like the bankers who are departing; you definitely won’t like the sort who will be staying.
Which is exactly my point to be honest Nile. If the availability of real work (making things) declines then what are people supposed to do?
I agree that much of banking these days is indeed rent seeking.
But these people are humans being too. Talented people get drawn into banking because the money can be so good.
If we as a society value financial engineering more than real engineering then can we blame people for choosing banking as a career?
What is needed is an overhaul of the economy and a re-regulation of the financial ‘industry’ so that it becomes a service that helps people rather than a service that enables those providing it to help themselves (thank you Christine Lagarde).
The anti-industrial /pro-financialisation policies that we have been following since the mid late 70’s have got to stop. As of 2008 the industry of making money out of money that had already been made/been made/been made etc., actually stopped. The financial sector and our politicians should be made to grasp this truth.
A courageous government as envisioned on this blog would seek to address this.
If Nile you mean that we will be left with the tax avoidance and money laundering experts that will thrive in the off shore tax haven that BluKIP dream of creating, then you could be right. Although with a collapsed pound and increased unemployment the U.K. could retain or even increase its back office and call-centre workforces – low paid and skilled, competing with India… Some/many of the higher paid/skilled roles will drift to other financial centres as my City moles suggest is already happening, along with their incomes and taxes, personal and corporate. Socially useless I’d agree but there will be a negative financial impact
On the bright side, now that the EU does not have the UK holding them back, perhaps they will move ahead with initiatives like the Financial Transaction Tax.
But, post-Brexit, we’ll be free of the Lisbon restraints and so in theory, money no object! At least till we reach a genuine form of full employment as opposed to the current cosmetic posturing about high employment. Funding productivity shouldn’t be any problem, providing our political leaders can wake up to that.