Since the Brexit vote last June, there has been only limited movement from corporations towards potentially steadier economic locations.
However, that might be about to change.
JP Morgan has recently purchased an office building in Dublin, which will have enough capacity that the firm will be able to treble its number of workers in Dublin.
This could be the prelude to many large firms preparing offices abroad either as new headquarters or as precautions against the worst consequences of the British peoples courageous decision to leave the European Union and its associated collection of free trade treaties.
Concerns rise about what this could mean for London.
This purchase is suggestive of pre-referendum warnings that JP Morgan may move jobs abroad in case of Brexit – these comments have since been rolled back, but if Brexit goes poorly the risk might return.
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By GlobalDataMany other banks are no doubt in a similar position of wanting to retain operations benefiting from the UK’s place within the world financial markets while preparing for the worst.
While London provides a very attractive location for financial services, when the UK loses passporting rights (increasing costs for banks based in the UK operating in the EU) banks will need to assess if London is still the best location for them.
Certainly it will not sound a death knell for the city – a thriving business culture, supportive legal system, and sheer inertia will leave London a strong contender in international financial markets.
It is natural to wonder about the slim chance that London’s financial district does not weather this storm.
After all, London’s economy is hugely dependent on financial services and ancillary businesses; financial and insurance services alone made up 16 percent of Greater London’s economy in 2015, not taking into account professional services (a further 12 percent), much of which is dependent on financial services or other related activities.
Perhaps more importantly, London’s financial services industries directly make up 3.7 percent of the entire UK economy – half again as much as UK agriculture, fishing, and food and drink production combined, or half as much as the economy of Scotland.
Other financial services throughout the UK are in a similar position to be harmed by negative results of Brexit but are not nearly so concentrated, thus any impacts they feel will have less of an effect on the local economy.
With this in mind, it is easy to see that the health of the London financial services industry has significant effects on the wellbeing of London and on the country as a whole.
Certainly a large exodus of companies for European financial hubs such as Paris, Berlin or Frankfurt would be a career defining moment for any politician, and would have knock on effects throughout the whole British economy.
Paradoxically, this may even result in London’s importance to the UK increasing, as EU programmes aimed at boosting the competitiveness of deprived regions end and politicians circle the wagons to maintain the prosperity of the capital.
All things considered, we shall hope that, as seems likely, the numerous advantages that have built London into a world financial centre prove resilient to Brexit.
London will need to ensure its competitiveness and foster its unique culture to be certain of retaining its current position – or trust to history and hope for the best.
