With Brexit officially underway, London may lose prominence to a group of European cities ready to absorb its financial talent, according to research by Willis Towers Watson.
In a report released Tuesday, the consulting firm said the U.K. would likely lose a significant portion of its 2.2 million financial services jobs as companies seek to meet new regulations and employees re-assess their own location preferences. The loss may strengthen financial centers in Frankfurt, Paris, Amsterdam and Dublin, according to the report.
With workforce planning becoming a higher priority since Britains June 2016 vote to exit the European Union, staffing decisions will largely come back to straightforward economics tied to which countries have favorable legislation and regulation and where the best talent is available, Willis Towers Watson said. Uncertainty around what Brexit will look like, including future passporting laws, is already driving some firms to spread their risk by decreasing their London presence in favor of the E.U., according to the report.
There is no question that for financial services, the human capital impact of Brexit is likely to be significant, Willis Towers Watson said in the report. It will be interesting to see which European cities experience the greatest growth as a result of this change, and whether London will retain its status as one of the great financial centers of the world.
The cities in Germany, France, the Netherlands and Ireland that the consulting firm sees rivaling London have various advantages. Frankfurt is a financial center in Europes largest economy, while Paris is the headquarters of several major global banks, including BNP Paribas, Societe Generale and Credit Agricole. Amsterdam, meanwhile, is an emerging technology hub, well-connected to the rest of Europe, that has attracted Netflix, Tesla and Uber, according to Willis Towers Watson.
The same cities have some distinct disadvantages: Frankfurts low unemployment and demographics make for a difficult hiring market; Paris has high taxes and strict labor laws; and Amsterdam caps bonuses and pay for bankers, Willis Towers Watson said.
The report also pointed to Dublin as an alternative to London, noting that its an English-speaking city with liberal employment laws and low taxes. One of its drawbacks, though, is that the city isnt centrally located in Europe.
Britain officially began exiting the E.U. on March 29 when U.K. Prime Minister Theresa May triggered Article 50, a clause of the Lisbon Treaty which lays out the path for leaving. The U.K. has two years to transition out of the union.
In a cross-industry survey done by Willis Towers Watson immediately following the Brexit vote, 60 percent of respondents from the finance sector said the divorce would impact their businesses in the U.K. and in the European Union. Sixty percent also said they thought the decision would affect their U.K. workforce, while just 29 percent said the same about E.U. employees.
Rather than clear favorites, it may be that the financial services market becomes more fragmented but with no leading contended dominating in the short term, Willis Towers Watson said in the report. Financial services companies must be prepared to respond quickly and with agility.