The wine bars will be spookily empty. The lap-dancing clubs will be abandoned, and Savills will have to start working out how to sell mansions within an hour’s commute of Frankfurt and Paris instead of London. Just about every day brings another dire prediction about the impact of leaving the EU on the City’s mighty financial services industry. Only this week the Bank of England, which has turned itself into a semi-official chorus of doom on the issue, joined the fun, with reports that it was predicting 75,000 job losses.
No one denies that would be serious. The City is one of the most dynamic parts of the British economy, creating wealth that ripples out through London and the rest of the South-East, and contributing billions in tax revenues every year. And yet one point is too easily overlooked. In the context of of the finance industry, 75,000 jobs are not that many. And in a dynamic marketplace, if the City can’t replace those fairly easily then it has far bigger problems than dropping out of the Single Market.
Predictions of how many City jobs will be lost after Brexit are about as reliable as a share tip from your Uber driver. The only honest answer is that it will be somewhere between a few and a lot. Much will depend on what kind of deal emerges, and how strictly Single Market rules are enforced. It might be that a relatively small office in Frankfurt will be enough to count as being inside the EU, or it might mean a bank has to shift whole trading floors. In that context, it is worth noting that the European Central Bank doesn’t seem to be making any preparations for closing euro trading in London, which means it will face as much of a cliff-edge as we will. But it seems certain that a fair few will go.
And yet how much do 75,000 finance jobs matter? Not as much as you might think. There are two reasons for that. The first is that finance is a very big industry. According to TheCityUK, the closest is has to a trade body, 2.2 million people work in the financial services industry. So 75,000 only represent 3.4 percent of the total. It may well be a bigger percentage of the high-end London jobs. But it is still far from a catastrophic number.
The second is that the City has always been very good at finding new things to do. Right now there are lots of markets that are growing fast. Financial technology, with new web based forms of lending and borrowing, are booming. So is Bitcoin, and the growing range of crypto-currencies, as well as the new breed of crowd-funding platforms that are tapping into the UK boom in entrepreneurship. None of those have anything to do with the EU, which generally takes a dim view of new technology. All of those will keep growing, and should replace the jobs lost to continental Europe, as will continued links with the emerging markets, China and North America.
True, it is a shame if jobs move to Frankfurt. Any loss to the economy diminishes it. But it is also important to remember that finance is a very big industry, and a dynamic one. And it will quickly bounce back from any Brexit losses. In fact, if it can’t replace 3.4 percent of its business in the space of a year or two, then it has lost its mojo – and that is far more worrying an issue than losing access to the Single Market.