London, for decades the financial center of Europe, finds itself on the brink of a monumental vote. On Thursday, British voters will decide whether to leave the European Union in what’s known as the Brexit referendum.
While there is uncertainty over what a Brexit could mean for the UK economy and for London, there is also uncertainty over what it would mean for the United States and for U.S. companies.
The Los Angeles Times reports that while the U.S. economy is better insulated than most from the risk of market turmoil, the Brexit referendum has added to uncertainties in a presidential election year and to lingering concerns about China’s economic slowdown.
A lot of U.S. companies have something to lose if the UK decides to leave the EU, with the banking and insurance sectors among those most likely to be affected, according to this CNBC report.
Some U.S. companies have moved not just parts of their operations but whole headquarters from the U.S. to the UK, CNBC says.
For example, the world’s largest insurance broker Aon, relocated its corporate headquarters to London from Chicago in 2012, in a move designed to give the company greater access to emerging markets through London.
Aon told CNBC in a statement:
“If Britain votes to leave the European Union, the innovative center of excellence that has set London apart in the insurance space will be deeply challenged.
“Talent is a true differentiator for the city of London, and to create a barrier between the industry that addresses the world’s most complex risks and the global talent needed to do this will have real implications.”
If companies lose the ability to passport their services into Europe, they may decide to move their European hubs and staff out of London and the UK, which would lead to significantly higher operational costs.
The London insurance market has been very vocal on why remaining in the EU is the best outcome for insurers.
As Lloyd’s chief risk officer Sean McGovern said earlier this year, the London market is currently the largest global hub for commercial and specialty risk—controlling more than £60 billion ($88 billion) of gross written premium.
And the UK’s membership of the EU gives it access to the world’s largest insurance market with a world market share of nearly 33 percent and total insurance premiums of nearly Euros 1.4 trillion ($1.6 trillion).
In a recent paper, Lloyd’s, the International Underwriting Association and Fidelis warned that Brexit poses a significant threat to London insurance jobs and business.
Read more about the insurance sector impact of a Brexit in this analysis by London law firm Clifford Chance.
Aon’s full statement on the EU referendum is available here.