Will London lose 75,000 jobs in the financial services sector if we leave the EU without a new trade deal? The Bank of England seems to think so it released a report to that effect earlier this week and most commentators are taking their numbers seriously. They shouldn't.
They also shouldn't take too seriously any of the other estimates about job losses that might come London's way: these range from 30,000 to 230,000, depending on how upset the think-tank or consultant in question is about the idea that the UK really is going to leave the EU quite soon.
That's partly because the odds of us leaving without new trading arrangements in place are really very small (things that are in no one's interest and everyone knows to be in no one's interest don't happen that often). But it is also because these kinds of numbers are always wrong.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Bank of England numbers may be wildly wrong on the upside; they may be wildly wrong on the downside. But if past experience is anything to go by, they are definitely wrong.
My guess is that even if we do leave the EU with no deal of any kind, 75,000 is too high a number to place at the door of Brexit (there are other things that could cause it of course).
Note that the banks are already proving to be remarkably unreliable in their own forecasts (on which the BoE's are based): as Capital Economics point out, both JP Morgan and UBS have cut their forecast headcount loss by three-quarters, from 4,000 and 1,000 just a few months ago, to 1,000 and 250 respectively. HSBC has also cut its estimate to below 1,000.
Moving people to other European cities is turning out to look "costly and cumbersome" as well as largely unnecessary (Barclay's chief Jess Staley says Brexit is no more complicated than setting up the same kind of holding company in the EU next year as the bank did in the US in 2016). Some banks have recently made new commitments to London: "both Deutsche Bank, and Wells Fargo have leased or purchased office space over the last year."
The FT is sceptical on the numbers, too. They emanate from a 2016 report by Oliver Wyman consultants, says Lex, a "trade body as queasy about Brexit and its effects as the BoE". Oliver Wyman makes the mistake of thinking that the "City's dense interconnections make it vulnerable." Instead, they make it robust: "clusters above a certain size are very flexible" the paper quotes Cardiff University Economics Professor James Foreman Peck as saying.
There will be endless examples of mild hysterics panicking about Brexit and City jobs for some time to come (I spent ten minutes on BBC Radio Scotland earlier this week trying to calm one of them down) but until we get further into the negotiation process it will be hard to see what is and what is not worth worrying about. In the meantime I suspect, as does Lex, that the City will "soldier on" regardless.
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
