Banking & Brexit: Lower initial outflows - Nomura

According to analysts at Nomura, “Business as usual” for financial services is not a realistic prospect after Brexit, but the initial and long-term impact is perhaps not as dire as they once thought.

Key Quotes

“We estimate that the worst case for “Day one of Brexit” job move preparations is likely to be around 10k, with the possibility of a lower number if a transition deal is agreed earlier on in the process. That would halve the size of disinvestment we estimated earlier this year from £25bn to around £12bn or so and could be spread out over many quarters.”

“Estimating the long-term impact of Brexit and academic work suggests anything from -10% to +4% of GDP depending on the author. The long-term job impact is as difficult to quantify but typically sees estimates within the realms of 75k, but more recent estimates are around 35-40k.”

“Recent EBA data suggest EU27 banks have reduced their exposure to the UK, but the BIS and the BoE cast doubts about the validity of that data. If progress in negotiations is made soon, a significant risk of job moves and outflows in Q1 is reduced and the outlook for GBP lifted with it.”