Britain’s 2.2 million financial industry workers face uncertainty and the risk of thousands of job cuts after the country voted to quit the EU, leaving doubts over London’s status as Europe’s premier financial centre.
The ‘Leave’ campaign fronted by a slew of Conservative MPs and financial industry veterans won over its ‘Britain Stronger in Europe’ rival, after 52 per cent of Britons voted to leave the 28-nation club.
A morning of triumph and jubilation for the Brexit camp has been overshadowed by an average 13.4 per cent fall in the share prices of the top five British banks and slides of 12 to 14 per cent in elite wealth managers Schroders, Aberdeen Asset Management and St James’s Place.
European bank shares also tumbled more than 13 per cent, roughly twice as steep a fall as seen among big companies, with lenders in Italy and Greece hard hit.
A leave vote means the future of Britain’s financial services industry now hangs in the balance. All depends on the divorce between Europe and Britain, the latter’s ability to retain access to the European free market, and cope with the volatility that has seen sterling nosedive against major currencies.
The mood in the high-rise banking hub of Canary Wharf, home to JPMorgan, HSBC and Barclays, was sober and contemplative, with job security fears rising to levels unseen since the 2008 financial crisis.
Investment banks have already warned they could move thousands of jobs if Britain opts out of the EU, while the European Central Bank has signalled it could force euro trading out of London, the world’s largest foreign exchange market.
But some sought to play down fears of a catastrophic hit to Britain’s banking sector, pointing to extensive contingency planning and years of experience navigating crisis.
Jes Staley, CEO of Barclays – which suffered the biggest one-day fall in its share price on record on Friday – said the bank had a history of adapting to change and would work with authorities as the terms of the exit become clear. HSBC chairman Douglas Flint said the day marked a new era for Britain and British business, describing work to establish fresh terms of trade with European and global partners “as complex and time consuming”.
Jamie Dimon, CEO of rival JPMorgan, told staffers his bank “may need to make changes to our European legal entity structure and the location of some roles to comply with new laws as we serve our clients around the world”, casting a pall over its 16,000 strong workforce.
But the City of London Corporation, which oversees the capital’s financial district, said the leave vote should not lead to a major exodus. “There will be no mass exit of banks and financial institutions from the Square Mile,” said Mark Boleat, policy chairman for the City of London Corporation. “The general view of the City is that the government should push for the UK to retain our access to the single market.”
The British Bankers’ Association chief executive Anthony Browne moved to reassure people that banks across the country would be operating as normal on Friday. “People will be able to take money out of cash machines,” he said.
Months of bitter campaigning has left the industry – which earned £190 billion in 2014 – divided, with investment banks and insurers pitted against many fund managers and brokers who wanted a Brexit.
Property investor Richard Tice, a co-founder of Leave.eu, and one of the few prominent City figures in favour of leaving, told Reuters he cried tears of happiness after the vote. “There is huge joy, delight and pride. We have changed the course of history in the UK. It is very simple, everyone needs to calm down and do what we do well which is working and playing hard.”
But there was little of that joy in trading rooms. Sterling fell to its lowest level since 1985, the year before Britain’s deregulation of financial markets that helped propel the City of London into one of the world’s major financial centres in the so-called ‘Big Bang’.
All the major international and British banks in London had traders either working through the night or on call.
European government officials had said UK-based firms could lose privileges after Brexit, a move that could prompt banks to shift some operations to Frankfurt, Paris or Dublin to serve EU clients.
The Bank of England said it had made contingency plans and will take steps to meet its responsibilities for financial stability, in conjunction with domestic authorities and overseas central banks.