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3rd Oct 2022

IMF predicts 'pain' for UK, as banks prepare London exit

  • HSBC chief says some 20 percent of activities will leave London (Photo: Gyver Chang)

Brexit will not be “without pain”, said the head of the International Monetary Fund (IMF) Christine Lagarde on Wednesday (18 January), as more reports emerged of bank relocating jobs from London.

Lagarde welcomed UK prime minister Theresa May's speech on Tuesday, telling the BBC “less uncertainty is certainly better for the UK economy and for the rest of the European Union”.

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But she noted that the IMF still thinks the British exit from the EU “will not be positive all along and without pain”.

HSBC bank CEO Stuart Gulliver told Bloomberg on Wednesday that “irrespective of Brexit … London will remain a global financial centre”, but gave a quantification of the scale of bank activities that the bank will relocate elsewhere.

“Those activities covered specifically by European legislation will need to move. Looking at our own numbers, that's about 20 percent of the revenue,” said Gulliver, who heads the world's sixth-largest bank, headquartered in London.

Some 1,000 employees could be relocated to Paris.

The Goldman Sachs Group is reportedly also thinking of moving jobs out of the City.

According to German newspaper Handelsblatt, the world's 18th-largest bank is considering cutting the number of roughly 6,000 London-based jobs by half. Around 1,000 of those would be moved to Frankfurt, the German daily said.

Swiss bank UBS said about 1,000 of its 5,000 London-based employees could be affected, Reuters reported.

In the short term, however, the UK has posted some positive figures.

The BBC reported that unemployment was at its lowest level in more than a decade, with 52,000 people finding a job in the three months to November 2016.

The UK's unemployment rate stood at 4.8 percent, according to the Office for National Statistics.

But Dutch finance minister Jeroen Dijsselbloem, who chairs the influential meetings of eurozone finance ministers, said this would change in future.

He told NRC Handelsblad newspaper on Wednesday that he expected the so-called hard Brexit as outlined by May to lead to “massive unemployment” by 2037.

“Let's speak to each other again in 20 years, and then England will be back to where it was in the seventies,” said Dijsselbloem. “Totally outdated, massive unemployment, totally impoverished.”

Theresa May outlines 'hard Brexit'

The British prime minister confirms that the UK will leave the single market when it leaves the EU and will seek a new trade deal.

Grim forecast for UK banks after Brexit

Banks will need up to $50 billion in extra capital and see higher costs of $1 billion to diversify out of the UK after Brexit, a top consultancy has said.

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