Goldman Sachs has drawn up contingency plans to relocate some of its 6,500 staff in the UK to continental Europe should Britain’s financial sector lose its ‘passporting rights’ because of Brexit.

Re: Locate Magazine | David Sapsted 5 MAY 2017

Lloyd Blankfein, Goldman Sachs’ chief executive, told the BBC of the plans at the same time as the European Commission proposed new rules for euro clearing, which could also see jobs being moved from London after the UK leaves the EU.

Smaller UK footprint

Predicting that London’s position as a global financial centre could “stall” because Brexit could mean that UK-based banks would lose the passporting rights that enable them to trade freely throughout Europe, Mr Blankfein said, “A lot of people elect to have their European business concentrated in a single place, and the easiest place, certainly, for the biggest economy in the world (the US) to concentrate would be the UK – the culture, the language, the special relationship – and we are an example of that.“And if you cannot benefit from access to the EU from the UK – and nobody knows what those rules and determinations will be – then the risk is there will be some adjustment that will cause some people to have a smaller footprint in the UK.

“Without knowing how things will turn out, we have to plan for a number of contingencies.”Mr Blankfein’s remarks followed an announcement by JP Morgan that it plans to move up to 1,000 London jobs to Dublin, Frankfurt and Luxembourg, and after Standard Chartered confirmed it was negotiating with German regulators to set up a Frankfurt subsidiary.Reacting to Mr Blankfein’s comments, Catherine McGuinness, policy chairman at the City of London Corporation, said, “What Lloyd Blankfein at Goldman Sachs has said about the City is the same as a number of other leading international financial institutions.“It is entirely right that firms plan for all negotiation scenarios and assess what impact this might have on jobs in the UK.
Some of these may relocate to other global financial sectors and the City might not grow as quickly as it otherwise would have done. But this is entirely down to what sort of deal we get.”

Meanwhile, the European Commission outlined new proposals for regulating the derivatives market, which could threaten London’s dominance over the multi-trillion pound euro clearing market after Brexit.Commission officials said there were concerns elsewhere in the EU that up to three-quarters of euro-denominated interest rate derivatives were cleared in the UK and that such trades would no longer be subject to supervision by EU regulators once Britain left the bloc.“The bulk of EU-denominated derivatives are cleared in the UK and therefore we need to assess what implications it has for financial stability,” said Valdis Dombrovskis, vice-president of the commission, which is expected to come up with firm proposals next month.Miles Celic, chief executive of the lobby group TheCityUK, said clearing was concentrated in London because it had the “scale, expertise and infrastructure” to keep costs to a minimum “Disruption, uncertainty and fragmentation” He added, “A forced relocation of euro clearing would lead to disruption, uncertainty and fragmentation of the market.

A potentially less liquid and less competitive EU market would result in higher costs for European savers and investors.“This would ultimately be detrimental to people and businesses in Britain and in Europe. This is in no-one’s interest and is entirely avoidable.”Mr Blankfein told the BBC that his hope was that “we will be able to conduct our business as close as we can to the way we conduct it today – that is, we could have German nationals marketing German securities to German investors from the UK. And be resident in the UK and accomplish that.”He added, “I think it is in the best interests of the UK, the best interests of Germany, to have London – which has a lot of experience about regulating these markets – continue close to that model.”