Brexit could hurt the UK

Despite Brexit having formally taken place at the start of the year, with the end of the transition period, debate rumbles on about its real impact on the UK economy.

Now, the chief executive of investment bank JPMorgan has stated that Brexit “cannot possibly be positive” for the UK economy.

His warning looked at the short-term outlook for the UK economy and included a prediction that the bank may eventually leave the UK entirely, moving all of its operations from London to continental Europe.

In his annual letter to shareholders, JPMorgan CEO Jamie Dimon said:

“In the short run (ie, the next few years), this cannot possibly be a positive for the United Kingdom’s GDP – the effect after that will be completely based upon whether the United Kingdom has a comprehensive and well executed strategic plan that is acceptable to Europe.”

Dimon explained that uncertainties around Brexit “linger” for the UK, including around the financial services sector. That’s because the trade deal agreed between the UK and EU back in December did not cover services.

While both parties have already pledged to negotiate a trade deal covering services, European officials have indicated they are in no rush to conclude negotiations.

At the same time, the EU is forcing its banks to move more of their resources and staff into the European Union to comply with EU regulations; something that has caused alarm at the Bank of England.

In his letter, Dimon said the EU has the “upper hand” when it comes to these negotiations, and said that JPMorgan might have to move European-facing jobs out of London. This could be as many as 19,000 members of staff. He said:

“We may reach a tipping point many years out when it may make sense to move all functions that service Europe out of the United Kingdom and into continental Europe.”

Predicting the impact of job moves on London as a global financial centre, Dimon wrote that Paris, Frankfurt, Dublin and Amsterdam were likely to “grow in importance.”

He warned there were unlikely to be many winners from this “fragmentation” of the banking sector in Europe, which could ultimately result in higher costs for customers.

While he believes London is a “magnificent place to do business” and has the potential to adapt to these changes, reinventing itself, the City will need to move quickly to avoid longer-term problems. He wrote:

“Innovation is key to preparing for doing the business of tomorrow versus relying on the shifting ways of the past.”

This is not the first warning from Dimon over the impact of Brexit on the UK economy, as he previously warned that Brexit would be bad news for the UK financial services sector.

Before the Brexit referendum in 2016, Dimon warned that JPMorgan might need to move 4,000 jobs away from London in the event of a leave vote.

To date, JPMorgan has moved several hundred jobs from London to the EU, but accountants EY estimate a total of 7,600 financial services jobs have left the UK for Europe since the referendum vote.