Brexit: Who could take London's place? Some simple arithmetic – and some speculation


World Economics Prospects Report

A 10% loss of financial services jobs in London would represent a rise of one third in Frankfurt finance jobs – which feels like too many for the German city to absorb easily.

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In considering the risk that London may shed financial services jobs as a result of Brexit, we do need to consider whether any alternative EU city has the capacity to absorb the jobs that London loses. A simple comparison of the scale of financial sectors says ‘no’. But that ignores three things: that broader office-based employment in European cities suggests that they have more scale than is often assumed; that jobs may possibly split between cities (the ‘end of agglomeration’) and that artificial intelligence means that the number of jobs that other cities need to absorb may not be nearly as large as the number of jobs that London might potentially lose.

Could another city host London’s financial sector jobs?

In the months since the Brexit vote, the leaders of several European cities and other concerned politicians have been touting the merits of those cities as alternatives to London, should the terms of the UK’s exit from the EU prove to be severely detrimental to the UK capital.

To take just one example: the head of the Association of German Banks has urged the various layers of German government to do more to lure financial companies and institutions away from London, and persuade them to locate in Frankfurt instead. Politicians and business leaders in Paris, Dublin and elsewhere have been equally quick to set out their stalls.
How feasible is this? Can significant numbers of jobs really locate away from London, should the issue arise?

Likely barriers include less favourable tax regimes and labour laws in many EU countries, compared with the UK. But perhaps the most basic question is whether any EU city is ‘big enough’ to accommodate a significant shift of companies and people away from London. There is a common perception that in terms of scale, the likes of Frankfurt or Amsterdam just do not begin to compare with the might of London.
This is partly but not entirely a matter of real estate availability – are there and will there be enough spare offices for Londoners to move into, should they want to make the shift?

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