Forget racism. Forget the UK government's disparagement of the "international elite," forget opportunistic layoffs in the junior ranks. There's a new reason why young EU nationals might want to avoid London: sterling.
As someone helpfully pointed out beneath last week's article on the decade-long stagnation in pay for junior bankers in London, that stagnation only applies when London pay is measured in pounds. When pay for London bankers is expressed in dollars or euros, it's actually plummeted over the past decade. And it looks set to fall further still.
In 2006, the pound was worth around $1.9. Today, it's worth around $1.24. By the end of 2017, HSBC analysts are predicting it will be worth around $1.10.
While sterling-denominated pay for junior bankers in London stagnates, this is what the pound's decline means for banking pay expressed in dollars:
Similar things apply to junior bankers' pay expressed in euros. In 2006, one pound bought €1.49. Today it buys €1.11. Next year, UBS predicts it will buy €1.
Here's what that looks like in terms of the evolution in pay for junior bankers in London in euros:
Does this matter? Do people care that junior bankers in London have taken a huge pay cut when their compensation is calibrated in other currencies? Probably not, but they probably should. - In divisions like M&A, around 45% of London employees are non -British. The lower sterling falls, the more that young French, German and Italian bankers who want to earn and save in London with a view to retiring in their home countries are going to reconsider working in the City.
As ever, there's a silver lining. As sterling declines, it becomes cheaper for U.S. and European banks to situate staff in the City - especially if those staff are generating revenues in dollars or euros. It's a unfortunate, therefore, that their ability to achieve the latter is likely to be heavily compromised come 2020 or so...