A decade on from the seismic 2016 referendum result, London's financial sector – or 'the City' as it is affectionately known – has undergone a profound transformation in its relationship with Europe. The relocation of the European Banking Authority (EBA) and its 160 staff from One Canada Square in Canary Wharf to Paris marked a significant shift in the UK's financial landscape, casting a long shadow over London's status as a regulatory hub. This pivotal event was not without precedent; the EBA itself had been established following the global financial crisis of 2008, often viewed by some as a crucial safeguard against reckless banking practices while others saw it as an overly bureaucratic entity imposing unnecessary costs on lenders.
The immediate post-Brexit vote anxieties centred around a potential exodus of high-paying City jobs to European hubs like Paris, Frankfurt, and Amsterdam. Alarming estimates at the time forecasted a staggering 80,000 financial roles migrating across the Channel. While these predictions proved largely exaggerated in hindsight, some 7,000 jobs have indeed relocated to mainland Europe – a figure that has been quickly offset by new employment opportunities within the capital. Official statistics from the Office for National Statistics reveal an impressive increase in overall City employment, rising from approximately 500,000 roles in 2016 to around 675,000 today.
Despite this growth in employment, debates surrounding the economic impact of Brexit continue unabated among economists. Recent analysis by Bloomberg Economics suggests that Brexit has exerted a negative influence on the UK economy, estimated at between two and four per cent of GDP. Yet, within the City itself, sentiment leans towards moving forward rather than revisiting the Brexit debate.
Business leaders and financial experts increasingly voice their preference to avoid re-litigating the Brexit decision. Rain Newton-Smith, Director-General of the CBI, recently observed that while evidence pointing to business costs is compelling, companies are not inclined to reopen the debate. This viewpoint is echoed by Simon French, chief economist at Panmure Liberum, who notes that the City does not speak with a single voice on Brexit but most would rather focus energy on other pressing policy questions.
In terms of banking regulation, significant divergence from EU rules has been relatively contained, with changes primarily occurring at the fringes. Notably, the UK's decision to abolish the EBA's bonus cap rule – which previously restricted variable pay for bankers relative to their fixed salaries – appears to have been a key alteration.