Xavier Rolet, the chief executive of the London Stock Exchange, said that a minimum of 100,000 jobs in the UK’s financial sector could be at risk once the UK eventually leaves the European Union.
Speaking to Bloomberg TV on Friday morning, Rolet said that if the City of London loses its place as the global centre for clearing euro-denominated currency trades, jobs all around the UK could potentially move elsewhere.
Along with the possible loss of passporting rights, the removal of Britain’s role as the centre of euro-clearing is an issue that has been worrying traders and brokers in the City since Britain voted to leave the EU three months ago today, and Rolet thinks those fears are, to some extent at least, justified.
“We estimate, conservatively, that at a very minimum 100,000 jobs, in risk management, compliance, middle office, back-office support functions — by the way not just in London, up and down the country — are implicated in supporting this business and clearly could be at risk,” he told Bloomberg anchor Caroline Hyde.
Regardless of the huge crash in the pound since the referendum, London is at the heart of the global foreign exchange markets with more than $1 trillion (£747 billion) of trades taking place in the city every day, but that volume could be about to drop now that Britain has voted to leave the EU.
Rolet acknowledged that it would be difficult for euro-clearing to move from the UK given how deeply embedded in the City it is, saying “the point is that there are very, very few financial centres around the world that could accommodate such a global business.”
However, his comments are markedly less reassuring for finance workers than the last public remarks he made on the topic. Speaking after the LSE announced its half year results in August, Rolet said that any attempts to move the centre of euro clearing away from London “would require a treaty change. An EU treaty change is not an easy thing … so that is not impossible but at this time, for the moment, there is no immediate threat from that standpoint.”
“Negotiations will be incredibly complex. I don’t expect a swift resolution, it will take time,” he added.
There has been much discussion that should things like passporting and clearing be removed from London that another European city such as Frankfurt, Paris, or Dublin could take much of the City’s business, but Rolet believes New York would be the obvious destination for much financial activity.
“Is it possible that the whole thing could move? Of course it is,” Rolet told Bloomberg. “The London Stock Exchange Group via the London Clearing House operates a very successful clearing business and is currently licensed to operate in for example, in what I believe could be frankly the only logical alternative to London, if that came to pass, and that is the New York market.”
The issue of London’s role at the heart of euro-clearing is not an issue that has just emerged since the Brexit vote, and it has been a source of great argument for many years. The European Central Bank battled the UK in court over the issue in 2015.
European political leaders have also made it clear that once Brexit happens, euro-clearing will have to leave London. Speaking in Brussels at the end of June, French president Francois Hollande said “The City, which thanks to the EU was able to handle clearing operations for the eurozone, will not be able to do them,” he said, according to a Financial Times report at the time. “It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson.”