- JPMorgan’s Dimon says jobs at risk if ‘passporting’ goes
- Conservative Leadsom says weaker pound will spur exports
Executives of the biggest U.S. investment banks met British Chancellor of the Exchequer George Osborne seeking to maintain London’s status as a premier financial hub after U.K voters decided to split from the European Union.
The gathering in which Osborne sought to highlight the U.K.’s comparative strengths included Goldman Sachs Group Inc.’s Michael Sherwood, Robert Rooney of Morgan Stanley, Alex Wilmot-Sitwell of Bank of America, Bill Winters of Standard Chartered Plc and JPMorgan Chase & Co.’s Viswas Raghavan.
The government and industry shared “a common aim to help London retain its position as the leading international finance center,” according to a joint statement. “Britain’s decision to leave the EU clearly presents economic challenges, which we are determined to work together to meet.”
The London meeting underscored the risk of job losses in the industry, which employs more than 2 million in the U.K. JPMorgan may relocate “a few thousand” employees if the country’s divorce settlement with the European Union hurts banks, Chief Executive Officer Jamie Dimon told Italy’s Il Sole-24 Ore.
Eighty-seven percent of U.S. investment banks’ EU staff are located in the U.K., which is also home to 78 percent of the region’s capital markets activity, according to New Financial, a think tank.
The post-referendum stresses are starting to show in markets and the economy.
Four more U.K. property funds froze withdrawals on Wednesday as investors continued to dump real estate holdings, lifting the total of suspended assets to more than 15 billion pounds ($19.4 billion).
On Thursday, retailers Marks & Spencer Group Plc and Sports Direct International complained of fragility in consumer confidence following the vote. U.K. business sentiment also sank to a 4 ½-year low in the days after the referendum, according to data released by Lloyds Banking Group Plc. GfK is due to publish a survey Friday assessing consumer attitudes in the immediate aftermath.
While the pound rebounded on Thursday it remained close to its lowest in 31 years against the dollar.
“Brexit has put a lot of uncertainty in the markets and in the economy,” Dimon said. “The markets will calm down a little bit.”
Still, he questioned whether the U.K. could win continued use of the “passporting rule,” which currently enables companies with operations in the U.K. to sell their services to the other 27 nations in the bloc. Failure to do so would force him to consider shifting some of his 16,000 U.K.-based staff.
“If we have that passport after Brexit, we likely would not have to make any change at all,” said Dimon. “But I think the European Union will not accept that. It will put more conditions on the U.K. and might force banks to become smaller in London.”
JPMorgan, the biggest U.S. bank, makes almost $8 billion in annual income from the U.K., with about 9,000 staff in London alone and another 7,000 elsewhere in the country. Dimon held out hope that Brexit may never occur despite last month’s referendum. He speculated that European leaders may offer Britain enough incentive to stay in the union.
“Maybe you can even reverse Brexit,” Dimon said. “There are always solutions to the problems, as long as you have the right people in the room.”
There will be no shortage of cities seeking to lure JPMorgan away from London. Prime Minister Manuel Valls said on Wednesday that France is “in a competition” for employers, while Dublin, Milan and Luxembourg also advertised their virtues this week.
Companies outside of the U.K. are also expressing concern or taking steps to protect themselves. Air Liquide CEO Benoit Potier told BFM Business TV that Brexit is “relatively worrying” for Europe and could hamper growth.
Beijing-based Lenovo Group Ltd., the world’s biggest personal-computer maker, said on Wednesday it is considering price hikes to counter the falling pound and economic uncertainty caused by the Brexit vote.
The worries intensify pressure on the successor to U.K. Prime Minister David Cameron to strike the best deal with the rest of the EU. That race will narrow to two on Thursday with Home Secretary Theresa May and Energy Minister Andrea Leadsom the favorites ahead of Michael Gove for a summer run-off in which party members will decide the winner.
In a speech on the economy, Leadsom, who once worked in the banking industry, said even with the slumping pound there had been no “disaster” in financial markets from the backing of Brexit.
“The pound is weaker, partly as a result of the markets being wrong on the result of the referendum, and partly on the expectation of further interest rate easing,” she said. “But lower sterling is good for exports, and it makes inward investment more attractive.”
While a new prime minister is expected by Sept. 9, former party chairman Grant Shapps proposed accelerating the process so a new leader is named by the end of the month.
A drawn-out debate would pose “real-life consequences for jobs, livelihoods and the security of families across Britain,” the Guardian reported Shapps as saying.