Brexit could ‘trigger financial sector exit from London’

Job losses in the UK financial sector and the relocation of companies to elsewhere in the world will result from a vote of favour of a Brexit in next week's referendum on the European Union, according to a report from an eminent financial think-tank.

City of London workers
The City of London's place as a global business hub would be at risk because of reduced access to European markets, with an inevitable impact on service sector exports, warned the report from the Economist Intelligence Unit (EIU)."London has for decades been one of two global financial hubs, alongside New York. A Brexit vote on June 23 would put that position at risk, almost certainly depriving UK-based financial firms of their passport to conduct business anywhere in the EU," said the report."It is highly unlikely that continental European countries will allow unfettered British access to their financial services markets. EU countries may also be keen both to punish Britain for leaving and to use the opportunity to lure highly qualified financial experts to their own national centres, such as Frankfurt and Paris."The very likely result would be a substantial loss in UK services exports, both in financial activities and in associated business services such as accountancy, consulting and law."The report said that a Brexit offered "few – if any – offsetting opportunities" for the UK's financial sector with the likelihood of EU, US, Japanese and Australian companies based in Britain likely to repatriate activities and jobs."A shift in corporate domicile is likely to lead to transfers of employees, and the creation of new jobs, in the new location. Dublin, for example, has long been a popular European headquarters location for US companies outside of finance, and they have gradually built large workforces there," said the report.For the economy in general, the EIU said that the UK would face "serious and prolonged" pain, in addition to political instability, were there to be a vote in favour of leaving the EU in next Thursday's vote.The report, 'Out And Down: Mapping the Impact of Brexit', predicted that, by 2020, GDP would be six per cent lower that it would had the UK stayed in the EU amid a "palpable crisis" in UK politics."A vote to leave the EU would trigger a political and constitutional crisis with immediate and lasting impact," said the EIU. "It would be an event of immense force, pulling all other considerations into its orbit until the terms of the Brexit agreement have been negotiated."Mr Cameron's authority would be shattered. He may well seek to stay in office for a transition period in order to help to manage the initial maelstrom. But against a backdrop of huge political dislocation and plunging financial markets his grip on power would be irreversibly weakened."We would expect a mood of palpable crisis to prevail, with the Conservative Party in something close to meltdown as the divisions of the referendum campaign begin to solidify."In a separate report on Wednesday, the Confederation of British Industry (CBI) claimed that business groups in countries that the 'leave' campaign has cited as post-Brexit models for the UK, believe that Britain's position within the EU is better than their arm's-length relationship with the bloc.The CBI said business groups representing both large and small companies in Albania, Norway, Switzerland and Canada had all recognised "serious shortcomings" from the alternative relationships they have with the EU.Carolyn Fairbairn, CBI director general, said, "The Leave campaign has said we should be like Switzerland, Norway, Canada or even perhaps Albania, but all these countries say they'd rather be like the UK. They say that their models have big drawbacks, and that we already have the best deal."The single market is one of the UK's great success stories – we led from the front in its development – and now the Leave campaign is telling us to abandon it."Access to the single market allows ambitious firms to buy and sell easily in 27 other countries and smaller firms to be part of supply chains that span the Continent, creating jobs here at home and making the UK more prosperous."The Leave campaign admit that their preferred choice means withdrawing British firms' access to the EU single market of 500 million people. This will put British businesses out in the cold and hit jobs."

See why Manpower Group and CV Library, two of the UK's biggest recruitment agencies voiced concerns about a possible collapse in the jobs market, should there be a vote to leave the EU.

For more Relocate Global news and features about the UK economy and the possible implications for business of a Brexit vote see our Enterprise section.

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