Stay or go: Has London been spared a mass Brexodus?

Back in June 2016, just days before the UK was due to vote in a referendum on membership of the European Union, Jamie Dimon stood up in Bournemouth and warned of the consequences. If the UK voted to leave the EU, jobs were likely to be lost, said the chief executive of US bank JPMorgan. His own firm may have to shift thousands of its 16,000-strong UK workforce out of the country – possibly including many of those gathered at the bank’s Bournemouth office to hear him speak alongside the then UK chancellor of the exchequer, George Osborne. Over the three and a half years since the Brexit vote, job moves into and out of the UK has been a hot topic. And the effect on the workplace occupier market has drawn property professionals firmly into the conversation. In many cities, the prospect of pitching properties to big financial services names such as JPMorgan has seemed like a big boon for business. The investment banks that have traditionally made their European homes in London have all faced disruption over whether changes to the UK’s access to European markets would mean fewer jobs could be done from London. So as the Brexit date neared in January and it was revealed that JPMorgan is buying a second office in Paris to house staff from its sales and trading division that had been based in London, it seemed another sign that Dimon’s warning was coming to pass. Lottery ticket Cities such as Paris moved quickly to position themselves as a natural home for firms relocating from London as a result of Brexit. And those efforts have continued during the three-plus years of drawn-out negotiations between the UK and EU over the terms of the split. “Many cities saw big opportunities in [Brexit],” says Nicolas Mackel, chief executive of Luxembourg for Finance, an agency that promotes Luxembourg as a financial centre. “What the industry did was, in a very pragmatic way, look first of all at where firms already have operations, and second, where does it make sense to put which activity? That’s how investment banking and trading went to Paris and Frankfurt, for example, and asset management between Luxembourg and Dublin.” Mackel estimates that about 60 companies have publicly confirmed relocations of jobs to Luxembourg since the Brexit vote. Another 10 or 15 have committed to moves but have not yet publicly announced them, he adds. “While we do not welcome Brexit – we did not rejoice about Brexit, never have, never will – these additions are good news,” Mackel says. “They are a confirmation of Luxembourg’s attractiveness in these areas. But they’re not a winning lottery ticket.” In PwC’s 2020 paper on emerging trends in European real estate, Paris topped the tale for real estate prospects, with Berlin in second place, Frankfurt in third and London in fourth. The team at PwC said several European cities were poised to pick up business at London’s expense, and that this could be seen as a boost to their property markets if office take-up received a boost. “After the 2016 Brexit referendum, Amsterdam, Dublin, Frankfurt, Luxembourg and Paris all seemed set to win business in one form or another from London and the UK,” PwC’s report said. “The latest interviews [for the firm’s report] indicate the same cities are already Brexit beneficiaries to some extent – with more business likely to come their way in 2020.” Paris has seen “a significant rise” in interest from international occupiers as a result of the Brexit vote, says Franck Margain, who is a managing director at Deutsche Bank as well as being president of Choose Paris Region, an agency that promotes the French capital to foreign businesses. Margain points to IBM’s Global Locations Trends 2019 report, in which Paris became the top metropolitan area for the first time, taking London’s crown. In comparison, IBM’s study suggested Brexit is taking its toll on the UK, with a decline in inward investment “substantially greater” than in any other European country. No Brexodus yet But the losses to London, including to its office market, have been nowhere close to the worst-case scenarios once painted by the likes of Dimon and former Goldman Sachs boss Lloyd Blankfein. That is not to suggest that greater moves could not come. And agents and investment professionals alike acknowledge that with the UK’s access to EU markets still unclear, there is everything to play for. But as Catherine McGuinness, chair of the policy and resources committee at the City of London Corporation, noted in February, the so-called Brexodus of bankers from London has not come to pass. That has been welcome news for the real estate industry. The latest analysis from EG and Radius Data Exchange shows that financial services occupiers accounted for just over 20% of office take-up during 2019, only the second time in a decade in which financial services have edged out technology, media and telecoms as the dominant sector in London’s occupier market. And many occupiers have already shown that they will need push as well as pull factors – a good reason to leave London, as well as the attraction of a new home. The chief finance officer of the European Bank for Reconstruction and Development, a multilateral finance institution, told journalists in 2018 that he had as many as 10 countries pitching him a new home if the bank decided to leave London. Ultimately, its shift was far smaller – the EBRD will indeed leave its offices in the City of London, but only to relocate to Canary Wharf. Heading into this year, analysts at EY said financial services firms appeared to have “pressed pause” on announcing Brexit-influenced changes to their business, including job relocations. Omar Ali, EY’s UK financial services leader, said at the time that banks and other financial firms may have reached “peak preparation” last year in terms of mapping out moves. Property players reliant on a busy London market will hope that many of those preparations remain uncalled for. To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette