Maybe it will happen. Maybe Britain will leave the European Union. If you work in the City of London, you’re probably hoping that the morning of 24 June will bring a repudiation of the Brexit concept and that the country will have voted to remain within the EU. A departure could be disastrous for many of London’s finance professionals – not least monolingual Britons who won’t be able to chase jobs that are sucked back to Paris or Frankfurt.
And yet, temporarily at least, some finance jobs or finance-related jobs are likely to thrive in a post-Brexit world. They are as follows…
1. Senior M&A advisors
If Britain leaves the European Union, everything will have changed. Irrespective of subsequent treaty negotiations, uncertainty will reign. In this context, UK-based and European businesses that were reliant on free trade with the EU may want to set up European subsidiaries, or to restructure. Dan Davies at Frontline Analysts suggests this will create plenty of work for investment bankers: “Corporations will need to optimize their structures. There be plenty of divestments and the IBD guys will not be short of things to do.”
However, William Wright at New Financial, a think tank which issued a comprehensive report on the likely impact of Brexit on the City of London in April, cautions that any boost to investment banking division (IBD) jobs will be nuanced: “The bankers we’ve spoken to have indicated that clients are likely to be paralyzed by uncertainty for months – or even years – after a Brexit as everyone tries to work out what the future relationship of the UK to the rest of the EU would be.”
This kind of uncertainty won’t provide fertile terrain for deals and most bankers are likely to suffer as a result. One group, however, could benefit. “Large corporate clients are going to be in need of high level strategic advice on the likely future framework, how this will impact their business, and how they can mitigate that,” says Wright. “- This will play well to senior bankers at bulge bracket firms as well as to boutique advisory firms.”
The benefits to senior M&A advisors of a Brexit will be nothing compared to the benefits accruing to lawyers who can unpick EU treaties. Wright says plenty of banks in the City have already pre-booked law firms to ensure they have legal advisors on hand for the morning of the 24th if the worst comes to the worst.
3. Specialist UK portfolio managers
Brexit would have big implications for the asset management industry. As New Financial points out in its report, asset managers are concerned that they could lose current automatic passporting rights if Britain leaves the European Union. If this happens, nearly €1 trillion of UCITS funds currently domiciled in the UK could be deprived of access to the European market unless they redomicile in the European Union.
This would be bad for the Edinburgh fund management industry. It would be better for UK-based portfolio managers who decide to develop funds focused on investors in their home market, suggests Davies.
4. Regulatory consultants
As with laywers, so with regulatory consultants at the Big Four. In the event of a Brexit, banks are going to need some serious advice on how to structure their businesses, suggests Wright. “Most banks will want to future-proof their businesses by ensuring they have an adequate legal entity and number of staff on the ground inside the European Union,” he says. “Any financial regulatory specialist with knowledge of EU markets is going to be in huge demand.”
It’s not just regulatory consultants, it’s also regulators themselves. The UK Financial Conduct Authority currently provides advice on passporting and operating in non-European Economic Area (EEA) states. It could soon find itself inundated with queries about operating within the European Union if the existing passporting scheme from the UK is removed.
Equally, regulators in European Union countries are likely to find themselves inundated with requests to open new legal entities. All of this will require manpower, particularly as regulators are notoriously under-staffed.
6. Syndicated loan professionals
As New Financial and Wright point out, a Brexit is likely to nix plans for a European Capital Markets Union. This in turn is likely to nix the deepening of European capital markets and the “disintermediation” of loan providers (as corporates raise money from markets instead) so beloved of Goldman Sachs.
If European clients aren’t issuing bonds to raise money via Europe’s debt capital markets, they’re likely to continue taking out loans. This could benefit Europe’s syndicated loans professionals, who won’t have their dinner eaten by DCM bankers after all.
7. Volatility traders
If the UK leaves the EU, things are likely to be rocky. Duncan Weldon, Head of Research, at the Resolution Group, a financial services investment firm, has suggested that a British exit from the EU could trigger a credit event as investors reassess the UK’s large current account and government deficits.
Wright agrees that things could be messy: “In the first months post-Brexit, as you head into summer, there will be considerable uncertainty about the European Union and Britain’s relationship with the European Union. This could lead to ripple effects and the encouragement of anti-EU and anti-establishment parties across the EU. There could be existential questions about the future of the European Union and the existence of the eurozone and an intense period of market uncertainty and volatility.”
Anyone who trades on volality could clearly benefit. The danger is that it will be the ‘wrong kind of volatility’ and that volumes will plummet as clients opt to remain on the sidelines.
8. FX traders
As with volatility traders, so with FX traders – many of whom are likely to be one and the same. Bloomberg reports that banks in London are preparing to staff FX trading desks through the night on June 23rd. If Brexit happens, it could be a very busy summer.
Accountants will be awash in mandates as UK-based companies rush to set up legal entities domiciled inside the remainder of the European Union. Wright is predicting that banks will start throwing “huge resources” at this from day one.
10. Infrastructure technologists
Finally, banks aren’t stupid. They’re not going to move entire operations into the remainder of the European Union if they don’t need to. Subject to regulatory and technological constraints, it may be possible to build technology that will keep trading activities (and traders) in London, even though the trades are actually placed in the EU. “A trade or sale can be based in London and booked in another country either manually or through an electronic system,” notes Steven Griffiths, a former electronic products trader at Citi and company director at Absolute Derivatives.