Brexit is widely regarded as a catastrophe for Britain and has a serious impact on London as a financial center. There are reasons for this fear; Brexit will create a barrier between Britain and the European Union (EU); the flow of trade, capital, talent, and financial markets will be hindered, and many financial institutions in London will choose to relocate. In this context, the long-term outlook for the pound will be bearish, and a weaker pound will be inevitable.

Some financial institutions, which are in a panic, seems to support the above analysis. On September 17, 2018, United Bank of Switzerland(UBS)announced that it had chosen Frankfurt as its EU center after Brexit. In addition, there were many high-profile multinationals have announced their departures from London amid fears of the fallout from a no-deal Brexit. Since October 1, 2018, Panasonic, a well-known Japanese manufacturer, moved its European headquarter from Britain to Amsterdam in the Netherlands. Japan is one of the major investors of Britain, where there are more than 800 Japanese companies which providing 100,000 jobs in Britain. As Brexit getting closer, in addition to Panasonic, several large Japanese companies such as Mitsubishi UFJ Financial Group, Nomura Holdings, Daiwa Securities, and Sumitomo Mitsui Financial Group have expressed their plan to relocate their major EU bases out of London.

Since the Brexit referendum in June 2016, Ernst & Young has been tracking the Brexit plans of 222 financial companies. In the latest update by the end of November 2018, Ernst & Young said that 80 companies are considering or have confirmed the transfer of assets and employees. Ernst & Young expects financial services companies to set up about 2,000 new jobs in Europe in response to Brexit. The Global Financial Centers Index (GFCI) released by the UK think tank Z/YEN in September 2018, shows that Frankfurt ranks first among EU countries in financial center cities. Frankfurt Main Finance expects to transfer between EUR 75 billion and EUR 800 billion to Frankfurt in the first quarter of 2019. According to the Frankfurt Main Finance, 15 international financial institutions, including Morgan Stanley and Citibank, have proposed a clear plan to move their European operations headquarters from London to Frankfurt, involving a total of about 10,000 jobs. Luxembourg, a small EU inland country, also confidently stated that it will undertake some of the financial assets and new positions spilled from London.

Such pessimistic statements and expectations have already become part of the exodus from London. Under such a situation, the Bank of England has also lost its confidence. It is expected that by March 29, 2019, there will be about 4,000 jobs related to the financial industry moving to the EU.

However, the actual situation may not be as pessimistic as what has been suggested. In fact, there are indeed a handful of independent researchers not so pessimistic about the prospect of Brexit. Chan Kung, Anbound's Chief Researcher is one of these minority.

In mid-January this year, Chan Kung analyzed the situation of the Brexit and the prospect of the pound. At that time, the British pound exchange rate was weaker than the euro, but Chan Kung believes that the future situation may be very different. Britain's most conservative forces, including the British royal family, support Brexit, showing that Brexit has its deep reasons in Britain. It is certain that they know the pound is closely related to their personal interest, therefore in the current trend of the pound, the Brexit factor is probably only one aspect of the problem, and the other aspects would depend on the future trend. Chen Gong pointed out that in a world competing for who is worse, if the post-Brexit Britain is more stable than other countries, it may even start the reform and recovery of the Commonwealth to a certain extent, then the pound will become stronger again.

In his analysis of this micro problem from a macro background, Chan Kung suggested that the answer to the question of the possibility of these issues should be found not only from Britain but also from the United States and elsewhere. Chen Gong believes that the possibility of a revival of the pound is still very large. The United Kingdom has a population of more than 60 million., the Commonwealth and other countries can supply part of the resources it needs. Currently, the United Kingdom clearly believes that full cooperation with the United States allows it to get rid of its political dependence on the EU. While it needs to pay the cost at the initial stage of Brexit, once it is truly out of the EU, the UK can adapt to the changes in the future; this will have to depend on how the UK works with the U.S., with the Commonwealth, and with other countries, including China.

A recent survey by the BBC supported the above analysis by Chan Kung. Reuters conducted a survey of 132 of the largest or most important international banks, insurance companies, asset management companies, private equity firms and exchanges in London from January 3 to January 28, 2019. In the absence of an agreement between Britain and the EU and the possibility of a no-deal Brexit, only about 2,000 financial jobs are needed or have been moved from the UK to overseas. Meanwhile, a group of top investment banks plan to hire more employees in London, far more than the number of employees planning to be anywhere else in Europe. The results of these surveys indicate that these financial institutions expect that Britain will remain the most important center for their business in Europe, and this forecast will not change at least in the short term. The survey also showed that the financial industry, which is one of the pillars of the British economy and has more than one million employees, is not as predicted by many bankers and politicians in 2016, that Brexit would lead to a large number of financial jobs, talents, and transaction losses, and that London's status as the world's financial capital would be shaken.

The latest findings on financial institutions are so different from the "institutional consensus", apparently because the insistence on "consensus" ignores some important factors. For example, most bankers believe that the EU and Britain will eventually reach a compromise on the Brexit negotiations. Some financial institutions said that the relocation of financial positions is not necessarily related to Brexit. Even if Britain stays in the EU, some financial positions that need to be relocated overseas would still have to move out. A U.S. investment bank executive pointed out that the impact of Brexit is much lower than what had been expected; in contrast, China's economic slowdown and the U.S. political instability is more worrying. Some bankers said that although the current situation is a bit chaotic, the issue of Brexit is a technical issue that can be resolved.

These surveys indicate that after more than a year of confusion, the views of the global financial institutions on the Brexit and the British pound have gradually turned positive, which is consistent with Chan Kung's previous judgment; showing that the analysis methods are consistent and logically similar. The current international top financial orientations and actions show that their own boards are not acting according to the investment bank's research report, but rather focusing on a completely different analytical framework. It is difficult for the outside world to know what this thinking framework is, but what is certain is that such complex knowledge system is not limited to the financial industry. There are also reasons to believe that the previous judgments on the impact of Brexit on the British financial industry may significantly overestimate the negative impact of Brexit.

Final analysis conclusion:

How will the British financial industry be affected by the Brexit shock? The "institutional consensus" judgment so far might be way too pessimistic, and the negative impact of Brexit on the British financial industry may have been significantly overestimated.