In his annual letter to shareholders, Jamie Dimon noted that while a trade deal was closed before the New Year, there were still many issues to negotiate and that “Europe has had and will continue to have the upper hand.”
JPMorgan has around 12,000 employees in London and 19,000 in the UK.
Dimon said there may be a “tipping point” where he will have to move all his London operations serving the EU to the mainland.
I was writing as many in the city have been concerned about the lack of a comprehensive agreement on how financial services, Britain’s largest industry, will be carried out between the UK and the EU.
While the two sides recently signed a memorandum of understanding on financial services, they are a long way from reaching an equivalency agreement granting greater access to UK-based companies.
Speaking of the power imbalance between the UK and the EU in these talks, Dimon said: “In the short term (ie the next few years) this cannot be positive for UK GDP – the effect after that will be entirely based on whether the UK has a comprehensive and well-executed strategic plan that is acceptable to Europe. ‘
Dimon said how effective the old system had been for international banks like JPMorgan, with London being the financial center from which they could seamlessly conduct business across Europe.
“It was hugely efficient for all of Europe, and also for financial services companies,” he said.
He praised London for being “a great place to do business” in terms of the rule of law, people and technology, but said future financial rules with the EU remain uncertain in Brexit.
“It is clear that over time European politicians and regulators will make many understandable demands to move functions to European jurisdictions.
“Because of this, and because of strong European efforts to compete with London, Paris, Frankfurt, Dublin and Amsterdam they will grow in importance as more finance functions are performed there.”
However, he wrote, there would be few winners from this “fragmentation” because costs, likely passed on to customers, would increase as work was duplicated.
He cautioned: “We may reach a tipping point many years from now where it makes sense to move all functions serving Europe out of the UK and into continental Europe.”
However, he said London could still reinvent itself with digital finance and other technological advancements in financial services.