For decades, New York and London have battled over which city rules the financial world. The argument may seem silly, but billions of tax dollars paid by lavishly compensated bankers, traders and asset managers are the determining factor – so perhaps it’s not so silly after all.
Then came Brexit.
The United Kingdom is scheduled to leave the European Union on March 29, and London’s standing as a world financial center is facing a major hit. U.S. banking leaders with operations in London are busy getting to know new regulators and tweaking the legal structures of their overseas divisions. But mostly they are figuring out how many employees to take out of London and where to send them.
European leaders hope London’s trading, investing and corporate-merger activities migrate to cities like Amsterdam, Dublin and Frankfurt. BofA is building a European trading hub in Paris, and the Financial Times said BlackRock and JPMorgan have their eyes on the French capital. But Damian Nussbaum, director of economic development at the City of London Corp., which governs the city’s historic financial district, said over time he expects much of the financial activity in London will migrate to New York because it’s more cost-effective to do business in one big marketplace than in several smaller ones.
Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said for language and cultural reasons, many senior financial executives in London would prefer relocating with their families to New York than to, say, Frankfurt. It’s a messy situation, and all the more so because it’s unclear what sort of divorce agreement the EU and Britain will hammer out before the March deadline.
Up to 20,000 finance jobs will leave Britain or be created elsewhere as a result of Brexit, according to the U.K. Centre for Economics and Business Research. That translates into as much as $2.6 billion in lost annual tax revenue.
Source: Crain’s New York Business