Tech impact on City promises to trump Brexit

Uncertainty about Brexit might be the current catchphrase for financial services, but impending technological transformation promises an even more substantial challenge.

Following a recent briefing that she delivered for internal staff on the impact of Brexit, Head of Odgers Berndtson's UK Financial Services practice, Anne Murphy, looks beyond the headlines with her perspective on the impact of Brexit on the UK’s Financial Services sector.

“What is the likely impact on the City of London? Well, depending on which headlines you read, it’s either ‘welcome to hell’ or ‘a land of cake and consumption’.

“One thing is for sure. In the words of economist Howard Davies, the spectre of Brexit has set ‘a hungry cat amongst the financial pigeons’, as European financial centres jostle to lure business from London.

Next big movers

“Of course, many companies already have a fairly established presence in Europe, so the idea that any one city would dominate is unlikely. If the business is to leave London, I don’t see it moving to Europe. What is more likely is a move to New York, Hong Kong or Singapore, the next three cities after London on the Global Financial Centres Index. They all have the infrastructure and regulatory environments to support this.

“Numbers of City jobs moving to Europe have been headline-grabbers too. In many cases, the roles created in European post Brexit hubs will be additional headcount, as opposed to jobs moving location, all ultimately influenced by the conditions set by central banks and regulators around the regulatory requirements and human capital.

Impacts and concerns

“Drilling down to where Brexit is likely to be most felt across Financial Services, it’s investment banking and asset management at the high-impact end, with insurance next in line.

“Specific post-Brexit concerns take in how the current back-to back-trading practices will work, the passporting arrangements across the EEA, home/host regulation, complications around long-term products such as derivatives and insurance contracts, and, of course, the transition phase and how attractive a Brexited Britain will look to EU talent.

Automation acceleration

“However, Brexit deal or no deal, crash-out or smooth transition, it’s the onward march of digital automation that most threatens the number of jobs in the City.

“Figures from PwC and the Bank of England bear this out. The latter’s estimate of 75 000 job losses from Brexit to 2020 is in stark contrast to the 350 000 cited by PwC coming down the track due to automation and digitisation by 2030.

“In that transformation, there is, of course, huge opportunity. London is already the European leader in FinTech, and is ready to embrace the tide of tech revolution and to hold onto its crown as Europe’s global financial centre.”