Brexit and the waning days of the United Kingdom

[crazy canuck]

Buy Frankfurt high end property right now to profit from all the financial sector people relocating there soon.

It is being reported that there is a large jump in google searches being conducted by Brits regarding how to move to Canada 

[Hamilcar]

Buy Frankfurt high end property right now to profit from all the financial sector people relocating there soon.

It is being reported that there is a large jump in google searches being conducted by Brits regarding how to move to Canada 

Canadian property bubble bursting: forestalled!

[OttoVonBismarck]

Scotland actually faces a hard choice, with the price of oil being what it is, unless the EU were to promise extraordinary transfer payments (which would probably immediately cause British-EU relations to go insanely bad, like current Russia-Ukraine levels bad) to entice Scotland leaving Britain, there's a good economic argument that Scotland just won't be better off losing the subsidies it gets from Westminster in exchange for the EU. But if Brexit has taught us anything, it's that the British people aren't necessarily inclined to vote along lines of economic self-interest.

I have seen some articles in recent days that make the argument that the only way the EU itself can last long term is with much more generous transfer payments from richer to poorer countries--just like how within the United States poorer states receive far more from the Federal government than they pay in. Without such a system in place it's unlikely Scotland in the current economy will be able to make up for what it loses by leaving the UK with EU membership.

[OttoVonBismarck]

Speculating on the implications for future British growth at this time is like diddling in the dark, given that nobody knows exactly the kind of relationship but I'm just going to negotiate with the EU or with other markets. I wouldn't be surprised (though it's not the only possible outcome) if both the British and EU elites who will be the ones conducitng the negotiations you have a vested interest in the status quo opt for more minimum withdrawal, and one with very limited economic effects.

The City is dead in the water, and new investment by multinationals in the Europe-area will grind to a halt. Nobody in their right mind would build a new factory or open a new regional HQ in the UK now.

Lol no, the City may lose some business but you're talking like a right wing talk show host or something. Loud mouthed and not based in fact. Literally no one of consequence is projecting the sort of nonsense you're talking about. I think Hakluyt's projections are probably pretty accurate, you're cutting some % off of aggregate GDP growth. You're spouting off nonsense not based in reality.

[OttoVonBismarck]

Note that I'm not saying the City won't lose jobs--it certainly will. But there's a difference between the world's number one financial center losing jobs and it "being dead in the water." It's akin to saying New York is dead in the water as a global financial center because it may lose some jobs in some crisis--that's happened many times in its history and its status as a leading financial center has never been in doubt. Right now in fact it's ranked #2, and London #1, it's conceivable (perhaps likely) Brexit could see those rankings flipped. But all the activity won't go from London to one European city.

The City was a major financial center before the Euro ever existed, and will still be one after Brexit. It likely won't even fall lower than a #2 ranking globally simply because not all activity will go to one place. Paris is lobbying for some of the jobs that are expected to be shifted to continental Europe, and is expected to get some of them--but certainly won't get all.

Banks have already explored Frankfurt as a place to relocate staff, and it likely will benefit some, but the problem with Frankfurt--as anyone knows who has been there, is that it's not a trendy city. It has absolutely no chance of being a top jobs destination to the world's best bankers. It's a much smaller, less cosmopolitan city. It is dreaming if it believes it will replace London--Frankfurt isn't even listed in the world's top 10 financial centers in the index put out by Z/Yen. Dublin likely will benefit as well, but faces some of the same problems as Frankfurt (just not that big/trendy, and on top of that Dublin is more remote from Europe's center.) The most likely scenario is a loss of jobs in the City and a loss of prestige, but it will remain a top 2-3 global financial center, and its losses will be dispersed around Europe, not concentrated in one city.

[Josquius]

It would be too much to say London is gone but it's likely the rankings will more than flip.  Rather than fighting for number 1 London will be struggling for top 5.
Already if britain had stayed in the eu the natural development of asia was heading that way.
But with britain stabbing itself in the belly like this....
New York is the top city in an economy of 300 million +, second richest in the world.
London was the top city in an economy of 500 million +, richest in the world. Now..... less so.

[OttoVonBismarck]

FWIW if I was God-Emperor of the EU, I'd be going for a "nice" break-up. I think despite the desires for "revenge and recrimination" by some, if the EU does that I think it actually makes itself look even worse to the populist anti-EU movements in the rest of Europe. An "adult" breakup, and one accompanied by what absolutely must be a round of reform for the remaining 27 states I think is the way forward to a stronger EU, getting in a bitch fight with Britain, or even trying to foment Scottish nationalism, I think can cause a series of problems that could shatter the EU. I think the EU should remain essentially neutral in the Scottish matter, particularly.

[Hamilcar]

Lol no, the City may lose some business but you're talking like a right wing talk show host or something. Loud mouthed and not based in fact. Literally no one of consequence is projecting the sort of nonsense you're talking about. I think Hakluyt's projections are probably pretty accurate, you're cutting some % off of aggregate GDP growth. You're spouting off nonsense not based in reality.

How many bankers do you regularly speak with? And no, the loan officer at your local credit union doesn't count.

[Hamilcar]

It would be too much to say London is gone but it's likely the rankings will more than flip.  Rather than fighting for number 1 London will be struggling for top 5.
Already if britain had stayed in the eu the natural development of asia was heading that way.
But with britain stabbing itself in the belly like this....
New York is the top city in an economy of 300 million +, second richest in the world.
London was the top city in an economy of 500 million +, richest in the world. Now..... less so.

The fading will take a while, maybe 10-15 years. Cultural cachet sticks around for a long time.
In a similar way, Oxford and Cambridge are still ranked among the very best universities in the world. Today's reality is that funding for world-class research there is slim and they fail to attract top talent (excluding homesick Brits) because their salary offers for professors are not competitive.

[crazy canuck]

Buy Frankfurt high end property right now to profit from all the financial sector people relocating there soon.

It is being reported that there is a large jump in google searches being conducted by Brits regarding how to move to Canada 

Canadian property bubble bursting: forestalled!

Again

[The Minsky Moment]

Lol no, the City may lose some business but you're talking like a right wing talk show host or something. Loud mouthed and not based in fact. Literally no one of consequence is projecting the sort of nonsense you're talking about. I think Hakluyt's projections are probably pretty accurate, you're cutting some % off of aggregate GDP growth. You're spouting off nonsense not based in reality.

In the immediate short run, I would expect a lot of inbound investment projects to be postponed because of uncertainty about how the exit will be implemented and the other political uncertainties.  Whether that proves to be an ephemeral effect will depend on how quickly the political situation stabilizes and there is more certainty about the exit conditions.

[Admiral Yi]

Lol no, the City may lose some business but you're talking like a right wing talk show host or something. Loud mouthed and not based in fact. Literally no one of consequence is projecting the sort of nonsense you're talking about. I think Hakluyt's projections are probably pretty accurate, you're cutting some % off of aggregate GDP growth. You're spouting off nonsense not based in reality.

Someone mentioned upstream that Goldman is looking to relocate to Warsaw.

My understanding is the single market is what allows British financial service firms (or more accurately, financial service firms located in Britain, since all the global big boys have operations in London) to operate throughout the continent, and that continental companies will no longer be able to call up London to get their swaps and underwriting.  Am I wrong?

London has historically been a financial center because the UK historically generated large amounts of investable savings.  That's no longer the driver.

[OttoVonBismarck]

Lol no, the City may lose some business but you're talking like a right wing talk show host or something. Loud mouthed and not based in fact. Literally no one of consequence is projecting the sort of nonsense you're talking about. I think Hakluyt's projections are probably pretty accurate, you're cutting some % off of aggregate GDP growth. You're spouting off nonsense not based in reality.

How many bankers do you regularly speak with? And no, the loan officer at your local credit union doesn't count.

Non-responsive, Trumpian stupidity. Read any major financial paper--no one is projecting the things you are.

[OttoVonBismarck]

Lol no, the City may lose some business but you're talking like a right wing talk show host or something. Loud mouthed and not based in fact. Literally no one of consequence is projecting the sort of nonsense you're talking about. I think Hakluyt's projections are probably pretty accurate, you're cutting some % off of aggregate GDP growth. You're spouting off nonsense not based in reality.

Someone mentioned upstream that Goldman is looking to relocate to Warsaw.

My understanding is the single market is what allows British financial service firms (or more accurately, financial service firms located in Britain, since all the global big boys have operations in London) to operate throughout the continent, and that continental companies will no longer be able to call up London to get their swaps and underwriting.  Am I wrong?

London has historically been a financial center because the UK historically generated large amounts of investable savings.  That's no longer the driver.

FT does a better job than I, and stealing their content is easier than me typing:

What will Brexit mean for the City of London?

UK exit from the EU will have big consequences for international banks

What is Brexit's impact for London's financial centre?

Britain's decision to leave the EU is a historic one — and one of the sectors that will be profoundly affected is the City of London. There was no secret of the financial sector's preferences ahead of Thursday's referendum.

City UK, a lobby group that spans most of the City of London's big employers in banking, insurance and asset management, found in a poll that 84 per cent of members were in favour of remaining in the EU, while only 5 per cent backed a British exit.

Some smaller groups will be excited by the prospect of being unshackled from onerous EU regulations, and bankers will welcome the likely end of the EU cap on bonuses. But, for many big city institutions, the mechanics of how they operate may be about to change profoundly.

Over the past 30 years the City has become much more international, with US and other global banks now dominant. Crucial to their presence in London is the EU principle of "passporting", which allows them to access the European single market without restrictions. Several banks have warned that Brexit will undermine the logic of basing so many staff in the UK. JPMorgan said it could axe up to 4,000 UK jobs, while HSBC has suggested up to 1,000 posts could move to Paris, where it has a sizeable subsidiary. Many other employers said in private in the run-up to the vote that they would move jobs to continental Europe.

What is most at risk?

If there is one activity that the City of London dominates it is foreign exchange trading. Bankers are split over exactly how endangered London's crown is now that the country has opted for Brexit — the City had been dominant for decades before the creation of the EU. But its continued claim as the world's principal location for trading the euro — a $2tn a day market — looks vulnerable.

The European Central Bank has already attempted to bar clearing houses outside the eurozone from handling the euro. Last year, it failed, thanks to a ruling at the EU's highest court. But many in the City and in policymaking circles believe the UK only prevailed thanks to its membership of the EU. Outside the gang, they believe the country faces rapidly losing its euro business. Other connected trading activity could follow.

Which European financial centre would win at London's expense?

Paris recently made a bold pitch to woo City of London bankers in the event of Brexit. But, HSBC aside, most banks scoff at the idea that Paris would be a natural venue. Frankfurt, home of the European Central Bank and the financial capital of Europe's biggest economy, is also problematic.

The local economy minister said this week that several foreign banks had explored moving operations to Frankfurt in recent months.

But, as a small city with a population of less than 700,000 people, Frankfurt is seen as provincial and unpopular with staff. Dublin is English-speaking and attractive on tax grounds, but it is a relative backwater. The most likely outcome is that foreign banks with large operations in London will shift staff to a spread of eurozone locations where they already have operations — including Frankfurt, Dublin, Paris, Warsaw and Lisbon. That would fragment the financial services industry in Europe, potentially weakening the continent's ability to compete internationally.

In insurance, another sector whose European activity is highly concentrated in London, there have been predictions that Asian financial centres, such as Singapore and Tokyo, may now steal business from the likes of Lloyd's of London, the insurance market, if the UK capital no longer claims special access to Europe.

Would the City be more British now that the country has decided on Brexit?

In addition to the prospect that jobs will shift to other financial centres, the City may also now lose some of its most able employees as the UK heads out of the EU.

Free movement of people rules have allowed the City to expand by tapping the best staff from across the EU. Nearly 11 per cent of the City's 360,000 workers come from elsewhere in the EU, according to the latest census. That is clearly the biggest contingent, after the 78 per cent accounted for by domestic labour. Ireland, France and Italy between them account for almost half of all the City's EU migrant labour.

Depending on the nature of any post-exit deal between the UK and EU, the City will almost certainly revert to being less international. Time, perhaps, to dust off the bowler hat and rolled umbrella uniform of 30 years ago.

[The Minsky Moment]

London has historically been a financial center because the UK historically generated large amounts of investable savings.  That's no longer the driver.

It's based on a reliable system of commercial law, and on a cluster of international talent.  The latter may or may not be put to jeopardy depending on how exit is handled but xenophobic tinge of the exit campaign doesn't make for a good recruitment poster.

There's lots of cross border financial business that can be conducted outside the EU but again the uncertainty about what the ultimate rules will be is the problem.  the City is a big positive contributor to the UK BOP position, so even a small hit can have a noticeable macro impact.