Citigroup plans new operations away from London after Brexit

Citigroup has set out 25 criteria to weigh up which financial centre in the European Union will house the new operation it expects to set up as a result of Brexit.

The US bank, which employs 9,000 people in the UK, has been in discussions with the authorities in Ireland, Italy, France, Spain, Germany and the Netherlands as potential locations for the new operation it is preparing in anticipation of losing access to the remaining 27 members of the EU once the UK leaves the trading bloc.

James Cowles, who runs Citi’s operations in Europe, the Middle East and Africa, said a decision would be made in the first half of the year. He told a conference in Dublin he thought many other financial firms with London operations would be working to a similar timescale.

The City is rife with speculation that the triggering of article 50 – which is planned for March and will signal the formal negotiations to leave the EU – will lead to major US, Japan and Swiss banks in the UK implementing their Brexit contingency plans. The race is on among financial centres in the EU to lure any business lost by the City in the Brexit fallout.

Cowles said the criteria would be used to help the bank, which employs 19,000 staff across the EU, decide which would be the ideal location to keep operating smoothly after Brexit.

Among the factors that will be considered are the complexities of the legal system, local infrastructure and each city’s capacity to provide suitable housing and schools for the employees and families being relocated.

“We will be making a decision in the first half of this year, it’s a decision that every bank has to make in the first six months of this year,” Reuters quoted Cowles as telling the European Financial Forum in Dublin.

The bank, which already has a presence in 21 of the 28 members of the EU, did not disclose how many of its staff would be affected by any move. However, Cowles said the main problem was with operations that specialise trading financial instruments for major clients.

“Our issue is with our broker dealer, which is located in the UK and will lose, presumably, passporting rights,” he said.

Passporting is the means by which banks such as Citi are able to conduct business out of London in other members of the EU without the need for extra regulatory approval. Last week Theresa May spelt out that the UK would not remain a member of the single market, which signalled to the City that banks will lose their passporting rights.

“We’ve reached out, we’ve talked to regulators and people at government across many countries in Europe, including Ireland, Italy, Spain, France, Germany and the Netherlands, and we’re in the process of evaluating each one of them,” Cowles said.

Citi already employs 2,500 in Dublin, and the Irish Times quoted him saying: “It’s been a great experience and when we take a look at different aspects of our business currently in Dublin, there will be some things that we’ll move [to Ireland].”

As a result of its structure, Citi may face less disruption as a result of Brexit compared with other major employers. JP Morgan warned in the run to the referendum that 4,000 UK jobs are at risk, while HSBC has reiterated that it will have to shift 1,000 roles to Paris to retain access to certain business operations after the UK leaves the EU. Swiss bank UBS has also said roles will go – citing Frankfurt or Madrid as possible locations.

Goldman Sachs is also expected to have to shift some of its 6,000-strong workforce out of the City. The bank’s chief executive Lloyd Blankfein said last week that New York would be the immediate beneficiary as Goldman was suspending current plans to move key operations from the US to London because of the Brexit uncertainty.

A look at London’s rivals to be EU’s financial hub

If London loses its place as Europe’s financial centre of choice, several cities will be waiting eagerly in the wings to pick up the mantle. But what are their advantages and drawbacks in the race to steal London’s crown?

Dublin

Pros

• Highly educated workforce with English as a first language.
  
• Existing financial centre with low tax rates and flexible labour laws.
  

Cons

• Property prices are high and an influx of bankers would push them higher.
• Limited transport links to the rest of the world, although good connections to Europe.

Frankfurt

Pros

• High quality of life; with good schools, low cost of living and nearby countryside.
• Angela Merkel’s economic powerhouse already hosts key financial institutions, such as the European Central Bank.

Cons

• Despite ample amenities, the city has a reputation for being quite boring. It’s not big, with a population smaller than that of Leeds.
• Other countries may oppose greater German dominance of Europe’s economic affairs.

Paris

Pros

• Good choice of international schools and the allure of being a genuine world city.
• International connectivity, via Charles de Gaulle airport.

Cons

• France’s reputation for high taxes on the rich and inflexible labour laws.
• Cultural resistance to accepting English as the de facto global language of business.

Amsterdam

Pros

• Plenty of available office space in one of Europe’s best-connected cities.
• An emerging tech hub that has attracted the likes of Netflix, Tesla and Uber.

Cons

• Dutch bonus cap limits bankers’ bonuses to 20% of their annual salary.
• Even Dutch bank ING admits the city has a shortage of experienced finance professionals.

Madrid

Pros

• The city is considering tax breaks for international firms looking to relocate.
• Good business links to emerging Latin American markets, unlike most European cities.

Cons

• Known for being particularly noisy and overwhelmingly hot in the summer.
• English-language skills are still catching up with other parts of Europe.