“London” is synonymous with the term “global financial center.” With its history, expertise, location and position as an EU gateway, the city is a hub for banking, foreign exchange and insurance industries from across the world. But Britain's long-running divorce drama with the EU has put this status in jeopardy.
The financial services industry is a key driver of the UK economy, but multinationals are already moving assets out of London to Frankfurt, Paris or Dublin. Lobby group Frankfurt Main Finance expects between 750 billion to 800 billion euros in financial assets will move from Britain to Germany before Brexit actually happens.
More than 250 financial firms have already moved or are in the process of moving their employees, assets and legal entities from the UK to the EU, according to New Financial, a London-based research institution, and major employers such as Airbus have warned that jobs and investment are at risk across the country.
Japanese automaker Honda, for instance, confirmed in February that it will close its factory in Swindon, England by 2021, eliminating 3,500 jobs, partly as a result of Brexit.
Of course, the manner of Britain's exit from the EU – or even that it will definitely happen – is not certain. But given the complexities involved in the decisions, these investments and jobs are unlikely to return, no matter how the Brexit drama ends.
The potential high upfront costs of doing business and the uncertainty that accompanies the drama have damaged the reputation of Britain as a safe haven for investment, though foreign direct investment has ticked up – helped by the dramatic fall in sterling since the Brexit vote in 2016 that has made takeovers cheaper for overseas buyers.
Downgraded expectations for economic growth – a worst-case Brexit could contract the country's economy by five percent within a year, according to the Bank of England – have dramatically dampened investors' confidence.
The British Chambers of Commerce, or BCC, forecasts that the country's business investment will decline by one percent in 2019, the weakest outturn since the 2009 financial crisis.
A messy and disorderly exit from the EU would also materially increase the likelihood of the UK slipping into recession, the BCC has warned.
In addition, 2019 forecasts for growth in services have been downgraded to 1.1 percent, manufacturing to 0.5 percent and the construction sector to 0.7 percent.
The pharmaceutical, auto and chemical industries, all integrated heavily with the EU, could shrink by more than 20 percent in the long run, economists have predicted.
With the theater of Brexit chaos entering into a third year, irrevocable damage has already been done to the UK economy – but how much more harm Brexit will cause is yet to be seen.
Animation consultant: Luo Qing
Animation directors: Wu Xiao, Song Yuhan
Animation post-production: Yuan Min, Song Yuhan and Wu Xiao
Script Writer: Liu Jianxi
Copy editor: Josh McNally
Voiceover: Mark Fontes
Producer: Bi Jianlu
Supervisor: Mei Yan
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