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.
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.