WARNINGS have been made about the impact on Scotland’s key financial services sector after the boss of HSBC said the bank is on course to move 1,000 jobs from its London business to Paris.
Richard Marsh, director of Edinburgh-based 4-Consulting, said he expected other companies to start shifting parts of their operations to the continent as they prepare for “the trauma” of leaving the single market.
Marsh, who told MSPs last year that Edinburgh’s economy is one of the most reliant on banking in Europe, said financial organisations are taking Theresa May’s speech on Tuesday as a signal to start preparations to move parts of their business.
“As they start preparing for the trauma of leaving the single market, it is inevitable there will be other announcements from banks and financial institutions. Banks need to have certainty they are going to be in the single market,” he said.
“I believe the move of 1,000 HSBC jobs out of London will almost certainly have a knock-on effect on jobs in the sector in Glasgow and Dunfermline. Even if the loss of jobs in the short term are in London there will be operations in Glasgow and Dunfermline which provide services to parts of the industry which may be very specific. They may be back office, but still very well-paid jobs and if core functions go it puts questions over the supply chain.”
Marsh was speaking after HSBC boss Stuart Gulliver said work was underway to move part of the business to Paris. “I don’t see the foreign exchange market moving, the investment grade bond market moving, the equity market moving and the high-yield bond market moving.
“Specifically what will happen is those activities covered specifically by European financial regulation will need to move, looking at our own numbers – that’s about 20 per cent of the revenue,” he told Bloomberg Television at the World Economic Forum in Davos, Switzerland.
He said about 1,000 employees are involved in those operations, “which in the event of single market access, would probably need, in our case, to go to France”.
Financial firms have been waiting to discover whether the UK can hold on to passporting rights which allow them to trade freely across Europe after Brexit. Without access to a passport, UK-based banks face a significant barrier when attempting to trade with countries within the European single market.
Lasts year 4-Consulting told a Holyrood’s committee the Edinburgh economy is more reliant than London’s on the financial services industry. Its report said 24 per cent of the Scottish capital’s economy depends on banking and finance, six per cent more than London’s.
The study also found EU nationals living in Scotland generate £7.3 billion a year for the economy.
Gulliver said there was “no rush” to shift operations away from the City, given HSBC already has a full service universal bank within the EU after buying up Credit Commercial de France in 2002.
“Some of our other fellow bankers have to make decisions pretty quickly, now given that the UK said it will come out of the single market, about applying for banking licenses in some of the EU countries. We don’t have to do that.”
However, Gulliver said the UK is still “the best place” for its headquarters, after scrapping proposals to move its base to Hong Kong.
The head office of HSBC’s global banking operations is in London, while its UK retail bank base is in Birmingham.
His comments come ahead of meetings between May and Wall Street bosses, including JP Morgan chief executive Jamie Dimon, today, just days after saying Britain will not stay in the European single market.
JP Morgan boss Dimon said earlier this month any British job losses as a result of Brexit would take place over a “period of years”.
The lender employs 16,000 people in the UK, with London hosting its European headquarters, and has previously said about 4,000 jobs could go if Britain loses the right to sell financial services to the EU.
There will be private meetings with the chief executives of other major US banks including Goldman Sachs and Morgan Stanley, and asset manager BlackRock in Davos, Switzerland where leaders are gathering for the World Economic Forum’s annual meeting.
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