Bankers who leave UK after Brexit can earn much more in Europe

13 November 2018 4 min. read
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Bankers who work in the United Kingdom and start working elsewhere in Europe after Brexit can count on a substantial increase in income in many countries. European governments have, in fact, devoted all sorts of tax rebates to lure the highly skilled financial services talent to their countries. In France and Italy, 'millionaire bankers' can keep more or less an extra $200,000 per year of their salaries. 

On March 29 2019, at 11pm UK time, the United Kingdom is set to officially withdraw from the European Union. The move will complete a two-and-a-half year process triggered by a shock referendum result on June 23 2016, when 52% of British voters supported leaving the EU. Since then, British politics and business have worked to put all kinds of rules and procedures in place to ensure that after the ‘go-live’ of Brexit, all flows of goods, services and people continue as they were prior to the new situation.

One of the sectors most impacted by Brexit is the financial services industry. Global banks, insurance companies and other financial institutions based in London are reviewing their operations, and assessing whether or not after Brexit the city still can serve as their base for the European mainland. To date, around 5,000 London jobs have moved to other countries, and in the long-run, even more jobs may well move to the continent.

Barclays and Bank of America Merrill Lynch for instance have shifted to Dublin, Ireland. While Germany's Deutsche Bank is still reviewing plans, the bank said that it could move up to 4,000 jobs to Frankfurt, a path that Goldman Sachs has already taken. The US bank has so far moved over 200 employees from London's financial services hub, as well as moving client-facing staff to among others Milan and Madrid. HSBC is in the process of moving an estimated 1,000 jobs to Paris, while JP Morgan is expected to move hundreds of employees to Paris, Dublin, Frankfurt and Luxembourg. Other banking institutions sitting on post-Brexit plans include ING, RBS, Société Générale, Standard Chartered and UBS.

Bankers who leave UK after Brexit can earn much more in Europe

On the other side of the process, the governments of European countries are eager to attract Brexit-leavers to their territories. Financial services jobs are well-paid jobs, meaning that highly educated talent will either end up moving to the new locale or local talent will receive a higher income, boosting taxes. Because of this, Frankfurt, Paris, Dublin, Amsterdam and other European cities compete for the favour of banks, stock exchange companies and asset managers who seek accommodation on the continent after their departure from the United Kingdom.

According to analysis by consultants from PwC, the governments of Italy and France have put in place the most fiscal lures for Brexit-leavers, concerning companies, but also for individuals, in the form of a higher net salaries. Bankers who earn € 1 million in gross revenue in London after tax earn a net salary of €542,869. If they move to Italy, such taxes have been slashed, and they can take home more than two hundred thousand more (€772,805) for the first five years. In France there is an income improvement of €180,000 for British expats for eight years. City bankers who move to Amsterdam enjoy an income improvement of around €100,000 for the first five years. This increase is close to what they can expect in Spain and Ireland. Strikingly, Germany does nothing extra for tax purposes for individuals to attract employees from post-Brexit Britain.

However, the experts at PwC also found that after the fiscal schemes expire, usually after five years, then the scales tilt back in the favour of tax authorities. At this point, big earners are best off in Spain, followed by Luxembourg, Germany, Italy, or even remaining in the UK. The Netherlands is still behind France and Ireland, but the differences among regular tax regimes are much smaller than under the expat arrangements. In Spain, €561,247 remains from a gross salary of €1 million after taxes and social security contributions. In the Netherlands this is €488,970.

Government policy

The post Brexit fiscal approaches of governments are sparking much debate across European countries. In the Netherlands for instance, the government wants to shorten the expat scheme from 8 years to 5 years. In the country, during those years, expats in certain professions do not have to pay tax on the first 30% of their income. The rationale behind the scheme is an allowance for extra costs that foreigners often have when they come to work in the Netherlands, and as a result, the Dutch Minister of Finance is facing heavy criticism for his proposal to weaken it. Meanwhile, in Germany, the clamour is growing for the nation’s government to do more to attract bankers and other financial sector employees at an individual level too.