JP Movin Out (Anthony’s Song): JP Morgan begins its Brexit Move
October 4, 2020
2 min read
What's going on here?
JP Morgan Chase & Co. has asked staff to prepare to move from London due to the possibility of a no-deal Brexit.
What does this mean?
JP Morgan has begun its plan for a no-deal Brexit, announcing that it plans to move out of London. This is because senior managers believe the UK will not reach a deal for the financial services sector before leaving the EU. Around 200 employees were told that they will need to relocate from January to Paris, Frankfurt, Milan and Madrid. Employees will be given 6 months’ commuting and accommodation as well as language courses, according to the bank. This follows an escalation in UK-EU Brexit negotiations which have stagnated, with UK PM Boris Johnson calling EU negotiators “abusive”.
The Governor of the Bank of England also announced that “securing an agreement on financial services for investment banks wasn’t worth pursuing at all costs.”
What's the big picture effect?
JP Morgan is the biggest bank in the US, and its exit from the city could set a precedent. The Bank already bought a second office in Paris in January 2020 in preparation to shift its euro-related trading operations. But there are further complications caused by the coronavirus pandemic, wheresome employees would require a lengthy quarantine with every commute. Problems have also arisen for employees with children, who would be forced to relocate in the middle of the school year.
One of JP Morgan’s main reasons for moving is because the EU has yet to recognise the UK as a jurisdiction with strong enough rules to enable trade. This is a process known as equivalence. This is essentially X accepting that Y’s rules are “equivalent” and letting Y’s companies undertake business within its borders. The European Commission governs this and can withdraw equivalence without notice. This happened with Switzerland when the commission refused equivalence and Swiss shares were barred from EU stock exchanges. Fixed-income and equities trading rely on this but core banking activities, such as deposit-taking and investment services to retail, are exempt.
JP Morgan’s move is likely to be followed by other banks and projections estimate hundreds of thousands of jobs could be at stake. Without equivalence, UK based banks will not be able to carry out business with European clients. Even if equivalence is granted, should the regulatory frameworks begin to differ, the EU could simply withdraw it. With the furlough scheme ending in October and Brexit negotiations failing to progress, the UK employment market may start to look even more barren than it already is.
Report written by Michael Johnson
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