US banking and financial sector companies may eventually shift thousands of jobs out of London and elsewhere across the UK as a result of Britain leaving the European Union (EU).
JPMorgan Chase CEO Jamie Dimon and other executives of the New York-based multinational banking and financial services company sent out a warning for their 16,000 British employees just hours after the market-rattling referendum outcome became known Friday.
“In the months ahead, however, we may need to make changes to our European legal entity structure and the location of some roles,” the bank executives cautioned. “While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world.”
A banking sector report released on June 15 by US investment banking firm Keefe Bruyette & Woods estimated that more than 10,000 British jobs at five major American banks could be affected.
“We’re already seeing rumors that certain teams and financial services will be moved from London to other parts of the EU,” said Raoul Ruparel, co-director of Open Europe, a think tank with offices in London and Brussels.
“Financial services firms in the UK are trying to position themselves to soften the impact and maintain their operations as much as possible,” said Ruparel. “Their situation has changed in a potentially major way.”
The Brexit vote means UK-based financial services and other companies could lose their “passporting right,” an authorization to sell their products and services across the European Union without shouldering the expense of opening local subsidiaries on the continent.
“Losing those rights could mean that banks would just have to set up a brass plate subsidiary in the European Union to process business essentially still done in London,” said a February report commissioned by Woodford Investment Management, an independent asset management company.
“Nevertheless, without passporting rights, it is conceivable that exports of financial services to the European Union could fall by half, or about £10 billion ($13.7 billion), the report concluded.
The economic impact could also be high for American banks and financial services companies with substantial British-based operations, according to the Keefe, Bruyette & Woods report.
The report estimated that JPMorgan Chase, Morgan Stanley, Citigroup, Bank of America, and Goldman Sachs collectively have 40,955 employees in Britain. As many as one in four of those workers could be affected by a so-called Brexit.