Impact of Brexit on UK financial services nears £4bn

The direct financial impact of Brexit on major financial services firms has reached nearly £4bn as of 31 May 2019, according to  EY’s Financial Services Brexit Tracker.

The sum includes £1.3bn cost of relocating staff and operations, legal advice, contingency provisions, as well as an additional £2.6bn for capital injections to scale new non-UK headquarters.

Only 13 out of the 222 firms monitored by EY’s Financial Services Brexit Tracker have put a figure on the direct financial impact of Brexit, with the actual figure therefore likely to be higher.

EY’s Brexit Tracker also found the number of planned jobs (7,000) and assets (£1trn) moves remained flat from the last quarter, reflecting that firms paused or slowed down their Brexit preparations once the extension to October was announced.  It added that many firms appear “reluctant” to make the final decision to move until they absolutely have to.

Omar Ali, UK financial services leader at EY, said: “So far, only a small proportion of the largest, listed Firms have put a number on potential costs, which means this number is likely to be a drop in the ocean as Firms prepare to do business post-Brexit. The financial impact of Brexit is beginning to fall to the bottom line, and firms are now making a direct link between financial performance and the tangible commercial impacts of Brexit.

“Capital deployed for supporting new non-UK headquarters is value which is not being returned to shareholders or reinvested in UK businesses. Over time some of this capital may flow back to the UK, but currently is a net loss for our economy.”

He added: “The past three months have seen most Firms to some extent pause their Brexit planning with both planned jobs and assets moves remaining flat. However, in the last few weeks we have seen some Firms restarting their programmes and we expect preparation activity for a no-deal to increase markedly throughout the summer.”

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