In two months’ time, the UK will leave the European Union. While the divorce is being viewed as a political issue, its economic impact is undeniable. London’s financial services industry, “the square mile” as it’s known, is the beating heart of the UK’s financial services industry and its status as Europe’s financial capital is under threat.
A report published this week estimated that banks and other financial companies have shifted at least a trillion dollars-worth of assets out of the country and into the EU. They’re setting up new offices in places like Frankfurt, so Brexit is already having an impact.
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“These figures came out a few days ago from eWire and we expect at least the same amount of money to also be moved. We alone, have very clear indications that about $800bn in assets will be moved into Frankfurt within this year,” says Hubertus Vaeth, the managing director of Frankfurt Main Finance.
“There will be various ways in which jobs will be impacted. The latest study which came out by eWire said about 7,000 jobs are expected to be moved in 2019. So far, a few thousand jobs have already been moved, and depending on the outcome of the final results, another couple of thousand jobs may or may not be moved.”
According to Vaeth, it’s very hard to estimate how it’ll impact people moving from London into continental Europe “because the majority of financial institutions will try to recruit on the continent. You don’t find a stampede of people who’ll want to move … so most people will try to stay in [London] and a minority will move.”
In Germany, Brexit “will have a significant impact on corporates”, explains Vaeth. “London, as of today, is for the global companies the place to go to find large financing and risk management, and they’ll have to shift that business because London will lose its passporting rights … so the companies will then have to relocate some of those financing activities to the continent.”
With London’s financial services industry pumping money out of the country, it “certainly does harm to the UK economy,” says Vaeth, “but [we] still don’t know the final outcome… Overall, the impact [of Brexit] is bad, we very clearly believe that Brexit is bad for the European Union, it’s bad for Germany, but it’s worse of all for the UK.”
Aviation outlook 2019
Challenges are already mounting up for the aviation industry in 2019. They include illegal drone use hitting UK air departures, Brexit, worries about the global economy, volatile fuel prices and an ongoing blockade on Qatar. The International Air Transport Association nevertheless predicts more people will want to travel in the year ahead.
Overall, airline tickets may be cheaper because of cheaper fuel prices, according to Peter Morris, chief economist at Flight Ascend.
“One of the key drivers behind that is what fuel prices are going to do, and at the moment, it looks like fuel prices are going to be lower in 2019 than 2018. So all things being equal, you’d expect some reduction in price.”
Aviation outlook for 2019
There are no positive elements on the aviation sector from Brexit, according to Morris.
“It’s a complete disaster – from the point of view of the regulatory front where the UK’s been involved in the European Common Aviation area and now would have to take rules from that rather than be part of the rule-making process. You’ve got issues about a decline in demand following the devaluation of the pound and ultimately, air transport follows where the GDP growth is and all the forecasts show that Brexit’s going to have a significant impact on the UK GDP, which will mean less demand in and out.”
“It’s damaged the business of all the major players in the Middle East and it’s damaged their economies, as well. There has to be some kind of resolution in order to facilitate the kind of levels of growth Middle East carriers saw before that did actually change the shape of aviation for the better. It provided more customer choice for more destinations, more origins around the world.”
“At the moment, you’ve got the problem that with aircraft orders going through and aircraft being delivered – the question is where those carriers are going to put those aircraft on the routes and it’s becoming challenging while you have these political issues.”
Also on this episode of Counting the Cost:
CES 2018: The biggest consumer technology expo in the world, The Consumer Electronics Show (CES), featured thousands of smart gadgets, artificial intelligence devices and hi-tech cars. One of the main trends in the expo was the drive towards more and more sophisticated technology in automobiles, as Rob Reynolds reports from Las Vegas, US.
Car industry: Amid uncertainties over Brexit, British car manufacturer Jaguar Land Rover has announced its plan to cut 4,500 jobs. The company has cited a slump in demand for diesel cars, a sales slowdown in China and the developments related to Brexit as the reasons, as Neave Barker reports.
Greece warships: Greece is asking its citizens to contribute some of their own money so it can buy new warships. And it may have to look abroad for funding, as John Psaropoulos reports from Athens.
Source: Al Jazeera News