Brexit: average cost of £50,000 per employee to relocate from UK

Synechron, Inchas announced the results of its analysis that determined it would cost banks and other financial services companies an average of £50,000 per employee to relocate parts of their UK workforce to another European city in the wake or Brexit. The company calculated the figure using estimated relocation, hiring and redundancy costs, new building and rent costs and other infrastructure & some contingency costs.

Tim Cuddeford from the Business Consulting Practice at Synechron said: “Following the UK’s decision to leave the European Union, many banks and financial services firms are having to consider where best to locate certain parts of their workforce. Financial ‘passporting’ is vital to the work many banks undertake across Europe and they will have to think carefully about which city within the EU their interests and their clients’ interests will be best served.

“Our calculations show that it could cost these firms on average £50,000 per employee to relocate parts of their workforce out of the UK, perhaps to financial centres such as Amsterdam, Dublin, Paris and Frankfurt. Other cities may be just as competitive and worth considering as long as there is access to similar talent pool and infrastructure.”

About the 50K analysis: 

Synechron Business Consulting help a number of large organisations with their global location strategies. The analysis of potential Brexit relocation costs used our knowledge and experience in this field to analyse a scenario in which a bank is planning to move 1,000 roles from the UK to a new headquarters in another major European financial centre.

Designed to assist organisations with their relocation planning, this analysis assumes that 65% staff relocate and 35% are new hires whilst excluding baking license and capitalisation costs as they would vary by regulator and individual firm too much. The analysis takes into account relocation, hiring and redundancy costs, new building and rent costs, as well as allowing for other infrastructure & contingency costs.

When broken down, the hiring and staff relocation cost is estimated to cost a bank looking to move 1,000 roles at around £23mn. In addition, new building and rent costs could be as much as £20.6mn. Allowing an additional 20% in a budget for contingency costs, the overall cost for a bank to consider in this scenario would reach just over £50mn. Therefore this would cost £50k per person, on average.

Search firms are also noting some movements of staff and have commented on their experience so far.

Lloyd Wahed, Managing Director at Athelstan Search has commented on the increasing prevalence of data analytics roles in London’s investment banks post Brexit

“We are hearing clearly that banks are looking to relocate certain functions from Britain to the Continent. However, it is clear that the bulk of this movement will be back office, support and administrative roles. On the other hand, not only are the more highly skilled and strategic roles staying put, we have seen demand for data analysts in London’s investment banks increase. 

“In particular, there has been an uptick in search requests for Chief Data Officers. This has largely been in response to impending European directives like Mifid II and the GDPR, which will still affect British banks post-Brexit. Overall, the growing importance of data analytics for both compliance and strategic purposes means that banks simply can’t afford to relocate such crucial members of the organisation.”

Alex Howard-Keyes, investment banking partner at executive search firm Alderbrooke looks at UK banks’ employment strategies and how they are changing in preparation for Article 50.

“It seems likely that some personnel will move to European destinations in time. We are hearing from some large US and European banks they are seriously considering relocating small operations to different destinations in Europe. Frankfurt appears to be the preferred location, although Dublin is also in contention. On the other hand, it’s not clear whether heavy handed marketing campaigns to lure banks to Paris have yet yielded results.

“Any future relocation will almost certainly be gradual and the scale of this migration will depend on the agreement reached by the UK & EU. In any case, the likelihood is London will remain the pre-eminent financial centre in Europe for the foreseeable future. 

“Firms must communicate any relocation strategy to employees as soon as possible. Employees themselves can also play a part. Marking yourself out as a flexible employee by putting yourself forward for roles required abroad will highlight your value.”