In case you’re not clear why so many U.S. investment banks are coming with an anti-Brexit stance consider this – 90% of their employees are based in the UK.
The free movement of labour is key to investment banks in the City of London, which relies on an influx of foreign talent in order to tackle European markets from a UK base. Taking Britain out of the EU – and combining it with the hoops banks already have go through to secure talent from outside of the EU states – will inevitably mean banks move people to Frankfurt, Paris or Dublin and this is bad news for London.
Quite how bad is illustrated in the table below. Large U.S investment banks had between 70-97% of their entire EMEA headcount in London as at 2014, according to new data published in a report by Brussels-based economic think-tank Bruegel. This is not back office staff, nor indeed traders which have started being shifted out to other European countries, but investment bankers in M&A, ECM and DCM teams.
Goldman Sachs, which has been vocal about its intention to move staff outside of the UK in the wake of the Brexit, has close to 97% of its EMEA-based employees in London. J.P. Morgan is the most spread across Europe, with nearly 70% of its employees in the UK.
These are just five banks, of course, but it matters even more if Bruegal’s predictions about how investment banking will develop, come to fruition. European investment banks are losing market share and will continue to do so, it says, and only a select band of U.S. investment banks will dominate.
Goldman Sachs, J.P. Morgan, Citi, Morgan Stanley, and Bank of America Merrill Lynch will be the sole ‘global investment banks’ left standing as European banks retreat over the next five years, it says. The ‘second tier’ will consist of strong regional players like Deutsche Bank, Barclays and Rothschild in Europe and Citic in Asia-Pac, says Bruegal. HSBC will also be in this group due to strong European and Asian roots. Below is a breakdown of European investment banking revenues over the years.