Even the most ardent supporters of Brexit understand that this process will be very costly. The spending list could include another item. Experts at Oliver Wyman said that banks would require extra 30-50 billion dollars to support their new European branches. These funds are about 15-30 percent of the sum that banks are already allocating to regional development. Besides, current transaction costs may increase by 1 billion dollars because the branches will have to duplicate a series of functions that previously had been processed in London.
If the Brexit has a hard scenario that implies a loss of privileged access to the single EU market, it will severely damage the European wholesale banking. Lindsey Naylor and Matt Austen at Oliver Wyman believe that this could knock 2 percent off their returns on equity. Besides funds, Britain could lose jobs. Banks have already started moving their offices to different European cities with Dublin and Frankfurt being among the most popular candidates for the new financial center. As a result, about 35,000 jobs, including up to 17,000 banking jobs, could move out of London in the next few years.
"Given that returns on equity in European wholesale banking are already below hurdle for many players, these new challenges from Brexit will raise difficult questions about the viability of some activities over the medium term," the Oliver Wyman consultancy said. "Some banks may even choose to withdraw capacity from the European market as a whole and redeploy to other regions, such as Asia or the US."
