HSBC in London (Chris WarhamShutterstock.com)
While the overall economic impact has been decidedly negative, the Brexit is expected to have a variety of effects, making its mark on various sectors to different degrees and hurting (or helping) some firms more than others. One of the biggest victims is the financial sector, for which London serves as a global capital. Reuters‘ Olivia Oran, Anjuli Davies and John O’Donnell look into how banks are responding to the vote:
Bank executives have been making contingency plans for months, but many were still surprised by the outcome of a British vote on Thursday evening to leave the European Union (EU). Even with those plans, huge uncertainties remain about when Britain will formally exit the EU, and what cities could replace London as New York’s transatlantic counterpart. … Among the questions being asked in C-suites across Wall Street: What’s the best European city to house a broker-dealer, if not London? Does Frankfurt have the capacity to house tens of thousands of bankers and their families? Will language be an issue in cities where English is not the primary tongue? Will American bankers abroad be able to find schools for their kids?
Frankfurt, Paris, Amsterdam and Dublin are all in contention for relocation. Even with all that uncertainty – and a timetable of at least two years for Britain to formally exit the EU – U.S. banks appeared to be moving quickly to respond to the Brexit decision. JPMorgan Chase & Co is considering changes to its legal entity structure in Europe, as well as moving some of its 16,000 U.K.-based employees, according to a staff memo signed by Chief Executive Officer Jamie Dimon and other senior executives.
Goldman Sachs Group Inc has been planning for the possibility of a Brexit vote for “many months,” Chief Executive Officer Lloyd Blankfein said in a memo. The bank has been building a new European headquarters in London, and is now considering what to do with all the space, a source familiar with the matter said.
For a fuller picture of how banks are responding, Portia Crowe at Business Insider has compiled a helpful roundup of the memos major finance CEOs sent to their employees in the wake of the Brexit referendum. Stephen Gandel at Fortune counts how many jobs Brexit might cost the City of London:
In its annual shareholder report, the insurer announced that it planned to adopt a $15 per hour pay floor for its corporate workers in the US, in pursuit of “attracting and retaining the best people,” Becky Yerak reports for the Chicago Tribune:
Nearly 10 percent of Allstate’s U.S. workforce has received or will receive the compensation increase, said Maryellen Thielen, spokeswoman for the Northbrook-based company. They work in such areas as claims processing and call centers. At the end of 2015, Allstate had about 41,100 full-time workers and 500 part-time employees.
Allstate’s move comes as some cities and states are phasing in wage increases that will grow to $15 an hour or more. The Fight for $15 movement launched in 2012 to demand a $15 minimum wage and union rights for fast-food workers, but since then, airport workers, adjunct professors, teachers, and nursing home and child care employees and others have waged their own fights against what they say are poor working conditions and general corporate greed.
To compensate for increased payroll costs, the company looks to be scaling back some other benefits:
At the same time it disclosed its $15 minimum compensation, however, Allstate also said it has “restructured” its U.S. employee pension and medical benefit costs “to spread these benefits more evenly across employees.”
“This keeps the overall cost structure competitive while ensuring we have the best team,” it said.
We know that student loan benefits are a major boon to employees, and pay dividends to employers in terms of loyalty and retention. Now, evidence is starting to come in on the value of tuition assistance programs, and the news is just as good. A study by Accenture found that Cigna’s employee tuition reimbursement program had an ROI of 129 percent between 2012 and 2014—meaning for that every dollar spent, Cigna got that dollar back and generated an additional $1.29 in talent management savings, David McCann explains at CFO:
Cigna wanted to assess the impact of tuition assistance investment on both revenue generation and talent management costs. But because of the diversity of the company’s performance metrics across its workforce, it was unable to identify any revenue factors for which data was accessible for the entire population of program participants. Therefore, the analysis focused just on the impact on talent management costs. The 129% figure includes savings related to employee promotions, retentions, and transfers.
Specifically, the research found that [Education Reimbursement Program] participants were 10% more likely than other employees to be promoted. That saves money because the more senior the position, the more difficult it is to fill through recruitment. Indeed, from strictly a cost standpoint, retaining any employee is obviously vastly better than recruiting a replacement, and the study found that ERP participants were 8% more likely to be retained than other workers.
“Workers gained big, too,”the Atlantic’s Mikhail Zinshteyn adds: