This report explores the possible implications of the UK’s departure from the EU’s single market for financial services employment in towns and cities with significant clusters of financial services activity across the UK.
It is very difficult to accurately assess the possible regional impacts of the UK’s departure because of uncertainties surrounding the future trading relationship between the UK and the EU. To address this challenge, this report applies the experience of regional financial centres to the 2007-8 financial crisis, and research on the regional dimensions of other periods to financial services contraction, to explore the possible relative impacts of the UK’s departure from the EU’s single market on financial services employment across the UK.
A summary of the report is as follows:
- Some regional financial centres, particularly smaller towns and cities close to London and London itself, currently have employment levels higher than prior to the 2007-8 financial crisis. However, core cities have seen weaker growth in financial services employment since 2008.
- The estimates provided, and evidence from previous contractions in the financial services sector, suggest that the implications of leaving the single market on financial services employment will be different for different types of financial centres within the UK, exacerbating already differential growth rates.
- All financial centres, including London, are estimated to have a marked decline in financial services employment in the first year following a departure from the single market.
- In the six years following the UK’s planned exit from the EU without single market access, it is estimated that London and smaller towns and cities clustered in the South of England will recover more rapidly than financial centres in the core cities in England, Scotland, Wales and Northern Ireland.
The views expressed in this research paper are those of the authors and not necessarily those of the UK in a Changing Europe initiative.