The role of the City of London as a hub for the European banking and finance industry is changing rapidly as firms respond to Brexit with Dublin emerging as the favoured relocation destination for asset managers, according to a new report.
New Financial, a London based think tank focused on the European capital markets, gathered information from media reports, regulatory registers and other sources to conclude that 269 firms in the banking and finance industry have now responded to Brexit by relocating part of their business, moving some staff, or setting up new entities in the EU.
Its report found nearly 250 of these firms were setting up new hubs for their EU business, and over 210 had already set up new entities or applied for new licences.
Big asset shift
Asset managers have transferred more than £65bn (€75.7bn) in funds from the UK to the EU, banks have moved or are moving around £800bn (€932bn) in assets and insurance firms are moving tens of billions of assets.
“We think our analysis is the most comprehensive yet of the impact of Brexit, but we know that the numbers significantly understate the real picture,” the authors of the report, William Wright, Christian Benson and Eivind Friis Hamre said.
“Some will have decided that the recent temporary agreements between UK and EU regulators to ensure continuity in the event of no deal provide enough comfort for them to hold off on any relocation decisions for the time being,” the authors said;
“Others, more worryingly, may simply not yet be ready. Over time, we expect these headline numbers to increase significantly.”
Multipolar industry emerging
According to New Financial’s research, Dublin has emerged as the clear winner in terms of attracting business from the UK, with 100 firms choosing the Irish capital as a post-Brexit location.
“This represents 30% of all the moves that we identified, well ahead of Luxembourg with 60 firms, Paris with 41, Frankfurt on 40, and Amsterdam on 32,” the authors of report said.
Source: New Financial
“Many firms have deliberately split their business and chosen separate cities as hubs for different divisions, and we identified more than 40 firms that are expanding in other EU cities in addition to whichever centre they have chosen as their main post-Brexit hub.
“This redistribution of activity across the EU has wound the clock back by about 20 years,” the New Financial report said.
Dublin key for asset managers
Not surprisingly different financial centres have attracted different firms based on their sector of activity. For example, roughly half of all asset management firms that have moved something as a result of Brexit have chosen Dublin, the report found.
Nearly 90% of the firms that have chosen Frankfurt as their main EU base are banks, while two thirds of firms moving to Amsterdam are trading platforms, exchanges or broking firms.
Source: New Financial
New Financial said there was no question that London will remain the dominant financial centre in Europe for the foreseeable future as firms are keen to keep as much of their business in London as possible.
“However, over time other European cities will chip away at London’s lead,” the report said.
The New Financial survey backs up a survey published late last year by the UK’s CFA Institute, the industry body representing investment professionals, which found over half of respondents in the UK expected to relocate some of their operations as a result of Brexit.
The CFA surveyed over 800 of its members who, when asked where they may relocate, indicated no clear winner but named Frankfurt, Dublin, New York and Paris as the most likely relocation destinations.