Eight billion reasons to worry.

Photographer: Andrew Harrer

If Britain Leaves the EU, U.S. Banks Lose

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Britain's pro-Europe camp drafted Jamie Dimon last week to warn about the dangers of quitting the European Union. Some commentators questioned the wisdom of enlisting the American JPMorgan chief to sway hearts and minds of Brits. A better question might be why the banking chief went to Bournemouth to share a platform with Chancellor of the Exchequer George Osborne.

The answer, you won't be surprised to learn, is money. JPMorgan's annual  income from the U.K. is close to $8 billion, dwarfing the $92 million it makes in Germany or its $42 million of French revenue, according to data compiled by credit rating company Standard & Poor's. Britain provides a sizeable chunk of the U.S. bank's global yearly revenue of about $92 billion.

QuickTake The Brexit Debate

In total, the U.K. contributes about $27 billion to the yearly income of America's five largest investment banks; as a percentage of their total EU revenue, Britain is massively more important to the U.S. firms than any of their other European outposts:

The transactions that generate those revenues won't just disappear if the U.K. departs from the EU; they'll migrate away from London to other financial centers in Europe, be it Paris, Luxembourg or Frankfurt. But the JPMorgan facility in the seaside town of Bournemouth and the accompanying 4,000 jobs settling and processing trades will stop making sense overnight if the Europhobes carry the vote. Trying to persuade staff to pack their bags and move their families to Germany or France or wherever will be costly, disruptive and time consuming.

It's not just U.S. banks that are likely to question the wisdom of having London-based trading desks that will end up outside of the EU. Deutsche Bank Chief Executive Officer John Cryan said last month that it would be "counterintuitive" to trade euro securities in the U.K. capital; business would "gravitate back to the euro zone," he said. Even U.K. bank HSBC Holdings said earlier this year that 1,000 of the 5,000 staff in its global banking and markets union would probably be shifted to Paris.

Those relocations would hurt Britain's finances directly. Workers in the banking sector contribute more than 7 percent of the U.K.'s tax take from wages, according to figures compiled by Bloomberg Intelligence, while their employers pay almost 6 percent of the country's total corporation taxes.

The opinion polls are split on the potential outcome of the EU plebiscite, with both sides in the debate providing a sorry masterclass in obfuscation, misinformation and scaremongering. So it's easy (and indeed correct) to be skeptical when Osborne says Britain could lose as many as 400,000 service-industry jobs in the two years after a vote to abandon the EU. He's guessing; no-one knows what the post-Brexit economic landscape will look like once two years of haggling over the terms of the divorce take their toll.

But it's clear that the incentives for foreign banks to have expensive investment bankers working from London will be reduced -- especially if the EU, cajoled by Paris, effectively pulls up the drawbridge by declining to grant firms in the U.K. the passports they need to provide financial services across the euro zone.

So when Dimon tells his 16,000 British employees that a quarter of those jobs are at risk if the `"Leave" contingent wins the EU vote later this month, you can almost hear the sound of wheeled suitcases clacking across the Eurostar train platform at St Pancras International station -- never to return.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net