5000 Jobs and Brexit

By Harry Lardner

“My greatest pain in life is that I will never be able to see myself perform live.”-Kanye West

The Bank of England has reported 5000 city jobs mainly in the financial sector will be lost by March 29th, 2019 . This estimate is much lower than predicted with the B of E originally predicting double the amount of losses at 10 000 and some other sources       (the London stock exchange) predicting upwards of 200 000 jobs in the financial sector being lost to Brexit. The financial sector in the UK was valued at 119 Bn gbp in 2017.

The reason for these job losses in the city may be due to big corporations relocation to areas where they can still operate within the EU after Britain leaves the EU. For example, the Bank of America plans to move 200 jobs to Paris.

In 2017 the average London salary was £39 000, that being a conservative estimate of the average salary of the 5000 job losses as some of those jobs lost would be high up workers working for large corporations and would be paid a higher amount than £39 000, 5000 people losing their jobs being paid £39,000 would result in £195,000,000 in wages not paid. This has a massive effect on the economy of the UK.

There are 2 kinds of people in the economy, dependants and, non-dependants. Non-Dependants are people who are part of the labour force and don’t rely on the state to get by , dependants are the opposite who are not part of the workforce and require benefits, 5000 job losses mean that 5000 people move from being non-dependant and earning money and paying tax to the government to having the state pay jobseekers allowance to them whilst they search for a job. They then become a burden on the government and the money paid to then in the form of benefits would also be better used somewhere else for example invested in the NHS. This is an example of an opportunity cost, an opportunity cost is defined as the next best choice foregone when a decision is made.

Widespread uncertainty may also spread through the financial sector in London, who knows if job losses will stop at 5000. The people remaining in the sector will curb their spending in case of job loss, this will then have a knock-on effect for surrounding firms as both newly unemployed and workers will reduce spending; other businesses like car parks near business parks or coffee companies will suffer. This is the opposite of the multiplier effect where jobs lead to the creation of more jobs.

To summarise Brexit has caused yet another case of panic and unemployment, however, 5000 may just be a drop in the ocean of job losses as a result of Britain leaving the Eu.

Sources:

Sahr D. Compton M Carr A (2018) ‘Brexit: what are the options for the financial industry?’ 

Kerr, S (2018) ‘UK Brexit Plans for City are unpopular and unlikely’ 

 Gonçalves P (2018) ‘London’s loss is Europe’s Gain as more firms relocate ahead of Brexit’ Available at: http://www.internationalinvestment.net/brexit/londons-loss-is-europes-gain-as-more-firms-relocate-operations-ahead-of-brexit/ ( Accessed 10 October 2018)

Contiguglia C. (2018) ‘City of London slashes Brexit job-loss estimate’ Available at https://www.politico.eu/article/brexit-fintech-finance-banking-jobs-city-of-london-slashes-brexit-job-loss-estimate/ (Accessed October 10 2018)