Conference Presentation, Panel
London Falling? Fact vs. Fiction
Milken InstituteFrancesco Guerrera, Bruce Carnegie-Brown, Kevin Klowden, Howard Shore, Hubertus Väth, Jasmine Whitbread
- London is projected to remain the primary European international destination and financial hub for the foreseeable future, with expectations that it will not decline despite Brexit pressures.
- In the banking sector, 15 US and Japanese banks plan to relocate their new European headquarters to Frankfurt contingent upon a Brexit outcome, potentially moving approximately 10,000 jobs if euro clearing operations are relocated.
- Uncertainty regarding Brexit is expected to force banks to initiate business relocations in the first quarter of the following year due to supervisory requirements and the need for access to the ECB.
- A specific Brexit proposal suggests paying £50 billion over 10 years (£5 billion annually) to secure full market access for services rather than goods alone.
- Concerns exist that poorly managed immigration and talent policies could cause skilled graduates and continental professionals to avoid staying in or moving to London, reducing the city's unique appeal.
- Businesses are currently delaying hiring and investment decisions, with over 50% on hold until clarity on a transition deal is provided, potentially by June of the following year.
- The financial services sector anticipates implementing contingency plans and making necessary regulatory investments for a "hard Brexit" scenario well before transition arrangements are finalized.
- Exhaustion regarding the unresolved nature of Brexit discussions is predicted to set in around 2018, alongside the expectation that the EU will not finalize agreements until the final possible deadline.
- The likelihood of a second Brexit vote is estimated at a maximum of 20%, though this remains a real option if initial voter expectations are not met.
- The UK faces a housing deficit, constructing only 24,000 new homes annually against a required rate of 66,000 to match economic growth.
- High-tax environments in the UK are expected to persist, with businesses indicating a willingness to pay increased levies without forecasts for tax cuts.
- Brussels-based operations are viewed as less efficient than current working models, prompting plans to build infrastructure around a new license once awarded to minimize friction.
- The Parisian environment is considered to have recently improved toward being business-friendly following the election of President Macron, though sustained improvement is required.
- The government is urged to provide immediate guarantees for EU citizens' rights and establish visa systems for high-skill sectors, noting that skills development initiatives for local youth cannot be implemented overnight.
- Market regulation is identified as a significant threat to London's financial standing, potentially exceeding the impacts of political figures or the Brexit process itself.