According to data from EY, the impact of Brexit on UK financial services has reached nearly £4 billion as of May 31, 2019.
This sum includes costs of £1.3 billion for relocating staff and operations, legal advice, and contingency provisions, as well as an additional £2.6bn for capital injections to scale new non-UK headquarters.
EY noted that many financial services firms have paused their Brexit planning over the past three month following the extension of EU withdrawal to October.
At the same time, there has been a three-fold increase in the number of statements from these firms announcing a tangible impact on their business as a result of Brexit.
However, 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, meaning the actual figure is likely to much higher.
“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,” said Omar Ali, UK Financial Services Leader at EY.
“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,” he added.
EY also found that 41% of financial services firms have publicly confirmed, or stated their intentions, to move some of their operations from the UK to Europe, with the number of jobs that could be moved estimated at around 7,000.
The amount of assets that could be moved to Europe is estimated by EY to be around £1 trillion, although this has remained unchanged since March due to the slowdown in planning.
Ali continued: “Given the tight timeframes and many unknowns, lots of Financial Service Firms have prepared for a “no deal” scenario with temporary contingency plans, which are often inefficient and costly. A more sustainable approach will need to follow once the long-term level of UK/EU market access becomes clearer.”
“The timescales around moving on from a “no deal” also look challenging,” he explained. Along with possible political fallout, the EU’s mechanisms for coming to new trading arrangements are complex, requiring unanimity and individual approvals from certain members states’ parliaments. All of this suggests further significant restructuring for Firms in the aftermath of a no deal exit.”
Out of the countries monitored by EY’s Brexit Tracker, Dublin remains the most popular European city for relocation, 29 companies saying they are considering or have confirmed relocating operations and/or staff to the city.
However, in the last three months, Luxembourg has seen the largest increase in companies choosing to relocate staff and operations, with the total rising from 19 to 23.