In Britain’s home counties there is the wife of a senior American banker who thinks that Brexit is mostly a good thing. “Brexit makes sense,” she says. “When the EU made laws limiting maximum vacuum wattage, everyone I knew scrambled to buy older vaccums. When the EU attempted to limit maximum wattage on kettles, that was the last straw.”
As an expat living in the UK, she didn’t vote in last June’s referendum on the European Union. If she had, she says she would have voted to leave. In this sense, she contravenes the norm: for most U.S. banks and bankers in London, Brexit is a headache they could do without.
J.P. Morgan’s Daniel Pinto said today that he plans to move hundreds of staff to expanded offices in Dublin, Frankfurt and Luxembourg in the “short term” to prepare for Brexit. If there’s no deal on passporting (as seems likely), Pinto added a “substantial portion” of the London business might follow along later. Last week, Goldman Sachs said it will start moving staff next year and intimated that its current London trading business might become uneconomical if it’s split with a new trading base within the EU. In March, Morgan Stanley CEO James Gorman publicly cautioned prime minister Theresa May against her complacency over U.S. banks’ propensity to stay in London after Brexit.
While European banks like Deutsche and BNP Paribas are currently operating in London as branches of entities licensed in their home countries, U.S. banks like Goldman Sachs and Morgan Stanley have historically preferred to be fully licensed in London and to “passport” into the EU. Their eggs are in the London basket. In 1989, Goldman Sachs employed just 715 people in London. By the end of last year, this had risen to 5,716. In Frankfurt, meanwhile, Goldman’s headcount currently numbers around 200.
The eFinancialCareers CV database suggests just 3% of finance staff in London are American (based on their claims to speak “American English.”) However, U.S. banks still like U.S. citizens to run their businesses in Europe, and there are plenty of senior staff in the UK. London used to be a haven in Europe for venturesome Harvard MBAs pursuing the Anglo Saxon dream. U.S. citizens this side of the Atlantic include Bank of America’s Christian Meissner, who runs corporate and investment banking out of London, Clare Scherrer, a partner in IBD at Goldman Sachs, or Troy Rohrbaugh, J.P. Morgan’s London-based head of macro trading.
For Americans in the City, Brexit presents several difficulties. The falling pound is one. “We’ve thought about moving back to the U.S. because the low valued pound means my husband is underpaid,” laments the banker’s wife. “This reduces our future retirement options. We used to get close to 1.8 dollars to the pound. Now it’s close to one to one and that certainly has an impact.” Assets denominated in pounds (think houses) are affected too. “All those GBP savings once bred for profitable USD conversion (upon repatriation) are now suffering 31-year lows,” says Mark Romeo, a former Credit Suisse AVP who worked in London and is now back in New York pursuing a career as a writer. “People can’t convert.”
More pressing for the future, however, is U.S. bankers’ monolingualism. If Britons are notoriously bad at speaking anything other than English, Americans are worse. “The trickiest things for American expats are the language barriers,” says Romeo. “For monolinguals it’s like a slow descent off a plank.” The issue is complicated by the likelihood that Frankfurt will emerge as the new EU trading center, combined with the fact that German is one of the most challenging languages to master.
Of course, there’s always the possibility of returning to North America. Some long-time London dwellers who voted to remain, like Joseph Mauro, a former partner at Goldman Sachs, have gone back already – although this probably had more to do with an opportunity at a hedge fund than Brexit. Others are biding their time and waiting to see what transpires.
The banker’s wife, meanwhile, says that for the moment Brexit has left her feeling trapped. “Europe is a fun place to visit and I love the French countryside, but working in Europe is not on the table because of the high taxes and high unemployment.” Nor does she want to return to the U.S.: “I no longer can stand the amount of salt in restaurant/processed foods, plus I prefer British weather.” Ultimately, she thinks the furore over Brexit will calm down: “Once clarifications and adjustments have been factored in I feel banks will readjust and be comfortable with hiring here again.” And if it doesn’t? “I’m glad that we have the option to move back to the U.S. if we need it.”