"2019 could be an expensive year for bankers in London"
If you work in a London finance job and are fortunate enough to get a good bonus for 2018, do not spend it. 2019 could be a year in which you are squeezed on all sides.
The threat of higher taxes looms. The recent Budget from Chancellor of the Exchequer Philip Hammond cut income tax by £600 a year for someone earning £200k, but a Labour government run by John McDonnell and Jeremy Corbyn is still waiting in the wings and McDonnell has promised to hike the rate of income tax for everyone earning over £80k. Senior bankers also fear the effects of a Corbyn-McDonnell administration on the City. "A hard Brexit means a falling pound and a rising FTSE; Corbyn and McDonnell mean a falling pound and a falling FTSE," says one ex-Goldman Sachs partner.
The real 2019 issue, though, may well be rising expenses. As disposable incomes are squeezed, London finance professionals face sector-specific inflationary costs. Call it Brexit inflation - the additional charges incurred by transplanting oneself to a different European city, plus the cost of keeping a home in London while children finish the school year.
"In the short term at least, a lot of people are planning to leave their families in London and to work in Paris or Frankfurt," says one credit headhunter. "It's going to be an expensive year," he adds."They will have to fund two homes." Although banks include relocation costs as part of the package for senior staff, they won't generally pay for travel back and forth every weekend.
Paris is increasingly emerging as a destination of choice for banks making preparations for Brexit. It emerged this week that Citi, for example, is looking for a bigger office in Paris after employees expressed a preference for the French capital over Frankfurt because of its proximity to London. However, even French citizens are balking at returning home full time. Only 13% of French people in the UK say they are ready to go back. Finance professionals corroborate this. "London is one of a kind, and there is no equivalent in Europe," says a French rates trader at a European bank in the City.
Nonetheless, some French bankers have traditionally kept their families in Paris while they work in London: "They're here Monday to Thursday, and on Friday they work from Paris and spend their weekends there," says the rates trader. After Brexit, this situation could be reversed, with more bankers commuting in the opposite direction.
Interestingly, Greek bankers have insights into life in finance when work in your home market dries up. "Ever since the [Greek] crisis, a lot of us have been working in London or Dubai and leaving our families in Athens," says one senior Greek researcher in the City. "But it can put pressure on your marriage and after around two years you find that you need to live in one location."
Long term, the same Greek researcher suggests bankers who bite the bullet and transfer their families to Europe will be at an advantage when it comes to applying for local jobs. "Last year, I had two job offers in Paris, but they both fell through when they found out about my family set-up," he says. "One recruiter said he couldn't be responsible for my divorce!" For bankers who decide to split their time between two locations, this could yet be another expense for 2020 or later.
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