No signs of exodus to other financial centres as FX recruitment holds firm.
Following the UK’s vote to leave the EU, European financial centres such as Paris and Frankfurt prepared to roll out the red carpet for London’s financial institutions. But this may be more difficult than initially anticipated.
Red tape regulations, heavier personal tax regimes, governmental issues and different social norms means there is little appetite for London’s foreign exchange (FX) trading institutions to move jobs to Europe en mass, according to recruiters keeping close tabs on London’s financial district.
Despite the Brexit vote, and repeated reports about banks accelerating plans to move jobs from the UK, European cities are struggling to match the pull factors that London offers.
London has long been at the heart of the international currency markets, accounting for more than 40% of FX turnover, according to the Bank for International Settlements. With its advanced infrastructure, access to human capital, a strong legal and regulatory system and a time zone that allows London-based traders to service customers all over the world, it has not only maintained its dominance but also attracted a host of emerging fintech companies to form one of the largest technology and innovation hubs in the world – further strengthening the City’s dominance.
All of this means the number of suitable alternatives to London is limited.
In an article for Euromoney, Andrew Kitchen, internal audit manager at recruitment consultancy Morgan McKinley, says there has been no increase in the number of people from the leading banks looking to leave the UK since the EU referendum vote.
This may be because transferring large numbers of FX staff to France in particular will not be a straightforward process, adds Raoul Ruparel, co-director of Open Europe. “Culturally and socially, France has taken a different approach to the UK in relation to this type of business in recent years,” he says. “It remains to be seen whether they have the appetite to offer tax or regulatory incentives.”
French employment and personal tax regimes are also likely to be a factor that counts against Paris, according to James Coiley, a partner at law firm Ashurst. “Making overtures to FX banks and traders to relocate to Paris may not play well with supporters of the socialist French government.”
However, the uncertainty seems to have stopped some banks from transferring jobs from mainland Europe to London, according to Kitchen. “What we are seeing is that several candidates based in Europe who had hitherto been looking to relocate to London are now staying put. This is in part due to the level of uncertainty around future Brexit implications, but also the current weak value of the pound,” he warns.
So while the outlook for 2017 remains unclear, London’s FX industry continues to remain resilient in the face of uncertainty and there has yet to be any knee-jerk reactions that disrupt the status quo on either side. Although it is still early days, what is clear is that fears over London losing its FX crown remain largely unfounded for now.
The City now looks to politicians with bated breath.