London has long been acknowledged as one of the premier financial cities of the world.\u00a0 The City of London, which is akin to New York\u2019s Wall Street, is home to more than 250 banks and a multitude of other companies that provide services and assistance to the financial institutions.[1]\u00a0 Yet, despite the multitude of financial companies currently housed in the City, there are now increasing questions about its future as a global financial center.\u00a0 Lloyd Blankfein, the CEO of Goldman Sachs, one of the pre-eminent American banks, recently tweeted: \u201cJust left Frankfurt.\u00a0 Great meetings, great weather, really enjoyed it.\u00a0 Good, because I\u2019ll be spending a lot more time there.\u00a0 #Brexit\u201d.\u00a0 Like many other global financial firms, Goldman Sachs is re-evaluating its position in London in the wake of \u201cBrexit\u201d, the British referendum to unilaterally withdraw from the European Union.[2]\u00a0 An American bank is not as tied to London as a major British bank, however.\u00a0 In this paper, I\u2019ll attempt to address the challenges and opportunities facing Barclays PLC, a major British bank, as it navigates through a post-Brexit world.<\/p>\n
Barclays PLC can trace its lineage back more than 300 years to two goldsmith bankers in London.\u00a0 Since then, the company has grown to employ more than 130,000 people across banking, investment banking, and investment management.[3]\u00a0 At the end of 2016, the company posted more than 21 billion pounds in total income across these major functions.[4]\u00a0 Though not a traditional manufacturer with a supply chain of raw materials feeding into a production process, Barclays still requires certain inputs to remain competitive and provide effective services to its clients.\u00a0 London has traditionally provided these inputs to Barclays in the form of a strong network of businesses, lawyers, and accountants as well as access to European markets.\u00a0 Pascal Boris, the former CEO of BNP Paribas UK, explained the labor market in the mid-2000’s as follows: \u201cIt becomes a self-fulfilling prophecy\u2026 If you want to be hired you go to where people will hire you: London is this magnet in Europe.\u201d[5]<\/p>\n
Given the importance of talent to Barclays and other banks headquartered in London, it\u2019s no surprise that there is concern that Brexit will cut off access to the European market and thus drive away the talent that fuels financial services.\u00a0 Research analysts warned ahead of the Brexit referendum that Barclays was the most exposed to negative effects from the EU withdrawal based on its reliance on investment banking and corporate banking.[6]\u00a0 The network effect that draws talent to London will gradually decrease as more firms take their operations to Dublin and Frankfurt, as several large banks have already announced they will do in the wake of Brexit.[7]\u00a0 It is therefore a major concern for Barclays that keeping their headquarters in London will provide an opening for their competitors.<\/p>\n
Unsurprisingly, Barclays has already taken some steps to try and mitigate the risks to their talent pool and revenue stream from Brexit.\u00a0 Jes Staley, the CEO of Barclays, has already announced that the company will split into two divisions, with U.K. retail banking remaining in London and corporate and investment banking headquartered outside the U.K.[8]\u00a0 He also emphasized that credit card operations are split 50-50 between the U.K. and the U.S. and Germany. These steps towards diversification will help to mitigate the damage of Brexit, but unfortunately still leave Barclays quite exposed to the fallout.\u00a0 In the mid to long term, Barclays seems primarily focused on divesting itself of several of its overseas assets, including retail banking in continental Europe, wealth management in Asia and the United States, and banking in Africa.[9]<\/p>\n
Although Barclays seems to be making efforts to restructure in the wake of Brexit, I see their tepid steps at moving out of London as being their most serious shortcoming.\u00a0 Already, competitors are moving to Frankfurt and Dublin en masse, with estimates for the number of jobs to depart London rising as high as 250,000.[10]\u00a0 Frankfurt seems the most logical choice for a new financial center, given the presence of the European Central Bank and several other financial institutions.\u00a0 Barclays should accelerate the departure of their corporate and investment banking arms from London to secure real estate and talent ahead of their competitors.\u00a0 Delaying this move in the hope that Brexit negotiations will succeed in maintaining British access to the European markets seems a dangerous gamble.\u00a0 By utilizing cash gained from the divestiture of global assets, Barclays has a unique opportunity to break out of the Brexit death spiral and re-establish themselves as a pre-eminent European bank.<\/p>\n
The questions I pose to my classmates are as follows:<\/p>\n
Can the U.K. achieve a \u201csoft Brexit\u201d that maintains access to European markets?<\/p>\n
Is London\u2019s reputation as a financial capital irreparably harmed? (Word Count 798).<\/p>\n
[1] Nesvetailova, A. (2017). Politics, capital and the City: London\u2019s financial reign in the face of internal and external shifts. Economy and Society Volume 46<\/em>, 153-158. Retrieved from http:\/\/dx.doi.org.ezp-prod1.hul.harvard.edu\/10.1080\/03085147.2017.1359910<\/p>\n [2] Proactive investors: Goldman Sachs group boss takes hit at Brexit with Frankfurt tweet (2017). Chatham: Newstex<\/em>. Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1952534174?accountid=11311<\/p>\n [3] A Quick History: from Goldsmith\u2019s Shop to Global Business (2017), Retrieved from https:\/\/www.home.barclays\/about-barclays\/history\/goldsmiths-shop-to-global-business.html<\/p>\n [4] Barclays PLC Annual Report 2016, 277, Retrieved from https:\/\/www.home.barclays\/annualreport<\/p>\n [5] Finance and economics: Capital city; London as a financial centre. (2006, Oct 21). The Economist, 381<\/em>, 96. Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/223996685?accountid=11311<\/p>\n [6] Holt, N. (2016, Jun 14). Barclays ‘most exposed’ to Brexit fallout. Fundweb<\/em>, Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1796367025?accountid=11311<\/p>\n [7] Meager, L. (2017). Frankfurt surges in Brexit battle for London’s business. International Financial Law Review<\/em>, Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1895777402?accountid=11311<\/p>\n [8] Dunkley, E. (2016). Barclays says Brexit will not curb London’s ‘gravitational pull’. FT.Com<\/em>, Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1849567178?accountid=11311<\/p>\n [9] Jes Staley, Ceo, Barclays, Is Interviewed On Bloomberg Tv Regarding Brexit And Financial Institutions (2016). Washington: CQ Roll Call<\/em>. Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1802257768?accountid=11311311<\/p>\n [10] Meager, L. (2017). Frankfurt surges in Brexit battle for London’s business. International Financial Law Review<\/em>, Retrieved from http:\/\/search.proquest.com.ezp-prod1.hul.harvard.edu\/docview\/1895777402?accountid=11311<\/p>\n","protected":false},"excerpt":{"rendered":" In the aftermath of Brexit, can Barclays still attract the talent it needs to be a market leader without abandoning London and relocating to Frankfurt?<\/p>\n","protected":false},"author":10407,"featured_media":24011,"comment_status":"open","ping_status":"closed","template":"","categories":[385,3230],"class_list":["post-23994","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-banking","category-brexit","hck-taxonomy-organization-barclays-plc","hck-taxonomy-industry-financial-services","hck-taxonomy-country-united-kingdom"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\n