Deutsche Bank is preparing for a possible exit from the UK because of the risk of a vote to leave the EU in the referendum promised by the government by 2017.
Deutsche, the eurozone’s second largest bank and Germany’s biggest, could move some of its operations to Germany or elsewhere in the EU. It employs 9,000 people at 16 locations in the UK and has had a presence in the country since 1873.
David Lutton, from the business organisation London First, told Channel 4 News: “I think it’s a big deal, a warning sign for London, which has more foreign subsidiaries than any other city in the world.
“One of the reasons they come here is because of the open economy. Anything that undermines that diminishes London’s effectiveness as a global hub. I’m not surprised big corporations are making contingency plans.”
Deutsche is not the only bank considering a move elsewhere. Britain’s biggest bank, HSBC, said in April it was studying options for moving its headquarters out of London.
HSBC, which has 48,000 staff in the UK, is also concerned about the implications of a withdrawal from the EU, along with the rising bank levy in the UK and “regulatory and structural reforms” introduced after the 2008 financial crisis.
Shareholders have told the board it should consider a move to Asia, where most of HSBC’s profits are made, with Hong Kong the most likely destination.
How important are financial services to the UK?
Despite the bank bailouts and numerous scandals over mis-sold payment protection insurance (PPI) and interest rate swaps, Libor and foreign exchange dealings, financial services are a major contributor to the UK economy.
In 2014, financial and insurance services contributed £126.9bn in gross value added (GVA) to the UK economy, 8 per cent of the UK's total GVA. London accounted for 50.5 per cent of the total financial and insurance sector GVA in the UK in 2012. It amounted to 18.6 per cent of London's total GVA. GVA measures the contribution to the economy of each individual producer, industry or sector.
In 2013/14, the banking sector contributed £21.4bn to UK tax receipts in corporation tax, income tax, national insurance and the bank levy. Trade in financial services makes up a substantial proportion of the UK's trade surplus in the services sector.
Another British bank, Standard Chartered, which has a big presence in Asia, is also considering relocating following the recent rise in the bank levy in George Osborne’s budget from 0.156 per cent to 0.21 per cent.
David Cameron is committed to renegotiating Britain’s relationship with the EU and put this to the voters in a straightforward in/out referendum.
Although some big firms are concerned about the implications of the UK leaving the EU, there are companies that are relaxed about a British exit.
Building equipment firm JCB has said it would not expect Britain to suffer any adverse consequences if it left the EU.