Why are companies announcing they’ll move jobs to the EU?

If you watched the news at all over the last few weeks you’ll have heard a succession of companies announce they will be moving jobs from the UK to the European Union unless they have full access to the single market and in some cases even if they do.

Many people have criticised companies for making these announcements, claiming it undermines consumer confidence others don’t understand why when we have “two years before we leave the EU” they’re making these announcements now.

In this post I take a look at which companies are making announcements, why and what it means for all of us.

Which companies are making announcements about moving jobs?

The list of companies making these announcements is growing every day but so far VodaFone, JP Morgan Chase, Citi, Easyjey and Goldman Sachs are some of the most widely reported. I will explain the particular reasons there are so many financial institutions listed in a separate post.

Why are they making these announcements?

The companies are making it clear to their investors that they will protect their revenues and access to the European markets to minimise the impact of the UK’s referendum result to leave the EU.

This is more important for those companies that either trade across borders in the EU currently using the banking “passport” rules or generate the majority of their revenue from the EU market outside the UK.

But it’s at least two years before the UK leaves the EU?

The problem is investors, lenders and customers are looking for certainty now and waiting two years or more for the UK to decide what kind trade deal it wants, let alone deliver it, would be commercial suicide for them so they have to move now.

Don’t these announcements damage the UK economy and these companies brands?

There is an argument that bad economic news damages the economy and increases the risk of recession as essentially recessions are caused when businesses and individuals reduce their spending so consumer sentiment (how confident people are about the future) is very important.

These announcements will understandably cause the concern among consumers which may cause damage to these companies UK business and temporarily impact their brand value in the UK.

Conclusion

The companies making these announcements are not making them lightly, they are making them to ensure their businesses survive and they can continue to raise money and give their customers across the EU confidence that they will continue to be there to serve them. This is critically important as if customers in other countries believe suppliers will not be able to serve them in future they will begin to change suppliers to those that they have more confidence in.

This isn’t because the businesses have any political point of view and there may be short term pain for them in the UK however if they’re taking these steps then it’s generally because they gain more of their revenue from the 27 other EU countries than their home market so the risk of them not speaking is significantly higher than the potential risk of making the announcements.

What do you think?

Do you have a different view, or further questions please let us know by commenting below.

Sources and Further Reading

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2 thoughts on “Why are companies announcing they’ll move jobs to the EU?

  1. Murray MacLeod says:

    Surely in the cases of CitiBank, Goldman Sachs and any other fiscal firm these job movements are a bit of a red herring, as they would have to setup headquarters in both the EU and keep them in the UK to be able to trade in the manner they do at the moment? Especially if the EU statement that they would not start trade talks with the UK until after the political union is broken at the end of the 2 year negotiation to leave ends, (Which seems particularly silly as the UK is at a trade deficit of £23.9bn).

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    • Neil M. says:

      Thank you for your question.

      Unfortunately not in the slightest, the job moves announced by financial institutions are roles involved in managing clients and business in the EU that are currently based in the UK because of their access to banking “passports” which allow them to trade across borders without local entities in each market. So these moves are a genuine net loss of roles in the UK and do not need to be replicated in any way in the UK for the bank to continue trading here.

      This has a significant impact on the UK economy as the taxes on the profits for the services provided to EU clients by these financial institutions will no longer be taxed in the UK, rather they will be taxed in whichever country the banks move their EU operations to, even if the banks retain their global headquarters in London.

      I’ll try to write a post about the specific challenges the financial service sector faces in a separate post to explain more and I’ll also try to outline why the £23.9bn trade deficit is a bit of a red herring, not that it’s untrue but because you need to look at who trade what and why our economy will be disproportionately damaged.

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