Britain’s finance industry could lose 10,000 jobs on the first day after the country leaves the European Union, the Bank of England warned Wednesday, as it urged the government to swiftly reach a transitional deal to smooth out the process.
Sam Woods, the central bank’s deputy governor for prudential regulation, told a parliamentary hearing that he expected 10,000 job losses on “day one” of Brexit.
That, he said, would represent around 2 percent of the British workforce in banking and insurance, or around 3 percent of those working in or around London.
Many firms in the financial sector are worried about the implications of Britain’s exit from the European Union, which is due in March 2019. Membership of the EU has given firms the ability to automatically sell their products across EU borders and London has become the European hub for many international firms.
Lloyd Blankfein, the CEO of U.S. bank Goldman Sachs, has been vocal in warning that his firm may relocate chunks of his business out of London to Germany’s financial center in Frankfurt. Other firms are also making contingency plans to set up operations in Europe or moving staff and activities to avoid potential disorderly Brexit, which would involve Britain not coming to an agreement with the EU on matters of trade.
The Bank of England has voiced concerns that many companies will start implementing those contingency plans early next year and has urged the government to agree on a transition deal with the EU to extend current economic and trade relations for at least a couple years after Brexit.
In a speech in September, Prime Minister Theresa May said she was looking for a transition deal of around two years after Brexit whereby Britain would continue paying into EU coffers and would be subject to the trading and regulatory rules that currently apply in the European single market. However, discussions on that have yet to begin amid a lack of progress on issues that the EU wants dealt with first, such as what Britain owes financially.
Woods told lawmakers that to be helpful for companies, a transition deal would have to be agreed soon, as it is a “wasting asset,” and that firms would start enacting contingency plans “in earnest” in the first quarter of next year.
Woods also said that a recent estimate from consulting firm Oliver Wyman that 65,000 to 75,000 jobs could be lost in the longer-term in Britain’s financial services was within “the plausible range of scenarios.” He said that the actual number would depend on firms retaining automatic rights to operate in the rest of the EU and whether Britain agrees on a transition deal.
In its report, first published last year, Oliver Wyman warned that “severe restrictions” could be placed on the EU-related business of British-based firms if Britain crashes out of the EU with no deal and has to operate under World Trade Organization rules. Under WTO rules, Britain would not be able to trade with its former EU partners on terms that would be any more advantageous than other countries that do not have trade agreements with the EU, such as the United States.
Woods said helping to deliver an orderly transition was the “number one priority for us.”