For London’s financial center, there’s no such thing as a “good” Brexit deal. Whether or not British negotiators secure a favorable deal for their country’s financial industry, the City of London will not emerge unscathed from the United Kingdom’s decision to leave the European Union.

The 2016 Brexit referendum and the political turmoil that has followed have already undermined two of the key drivers of the British financial industry’s success: the free movement of people between the U.K. and continental Europe; and more than 30 years of market-friendly policies by a succession of British governments — Conservative and Labour.

Much attention has been paid to the risk that bankers, traders and other finance professionals will be forced to leave London because their employers will find it legally or practically more convenient to move to the Continent. But over time, the real risk is not the bankers who leave — it’s those who won’t come.

“It is crucial for the City to be able to attract the best talent, and that is a key challenge in the next few years,” said Miles Celic, CEO of TheCityUK, a trade body for the financial services industry. “We need a global policy for talent, to attract not only people moving within companies, but entrepreneurs from Europe and also the rest of the world.”

Ever since the British financial industry underwent its “big bang” after then-Prime Minister Margaret Thatcher opened its rigid structures to global competition in 1986, the City has thrived as foreign talent came to help manage the massive flows of capital finding their way to London. French “quants,” Indian traders, German analysts and Swiss asset managers all thrived alongside their British colleagues.

"The City may lose up to 15 percent of its revenue if Brexit goes sour, and the government seems intent on showing foreigners the door” — London-based French banker

The City of London is the country’s most globalized industry in terms of workers’ origins. It employs nearly three times more foreign-born individuals (41 percent of its workforce) than the U.K. economy as a whole (14 percent). Of these, 18 percent come from Europe and 23 percent from the rest of the world.

“Now, the City may lose up to 15 percent of its revenue if Brexit goes sour, and the government seems intent on showing foreigners the door,” said a saddened London-based French banker.

It’s an open question whether the U.K. will succeed in the next few years in looking like the “open, outward-looking society” that Celic says it needs to be for the City to continue to succeed.

Among the scars caused by the heated Brexit debate is a 2016 speech by British Prime Minister Theresa May. “If you believe you’re a citizen of world, you’re a citizen of nowhere. You don’t understand what citizenship means,” she said.

“She chose to interpret the referendum as a vote against immigration,” said a senior British, London-based banker who requested anonymity. “She could have chosen to go another way, but after her ‘citizen of the world’ gaffe and now the Windrush scandal, how could she encourage foreigners to come and work here while keeping a straight face?”

Business unfriendly

The second impediment to the City keeping its luster is the notable change in the political environment. From Thatcher to Tony Blair to David Cameron, U.K. prime ministers have over the last three decades favored the growth of the financial industry, notably through a regulation-light approach and friendly tax regimes.

The tone has changed. A radicalized Labour Party led by Jeremy Corbyn may not be very far from power. And May has made it clear that she won’t be as cuddly with the City as her predecessors were. The financial crisis 10 years ago, followed by years of declining real wages, has shifted the Tories’ priorities to dealing with the country’s left-behind.

As for Labour, it has adopted a manifesto for a “better, fairer Britain” that, to put it mildly, shows little nostalgia for the glory days of the City of London.

The opposition party wants the financial services industry to work for “the real economy,” which it says would be based on the German model, seen as one where banks shun risky financial behavior and focus on lending to businesses and consumers. Labour also intends to create a “national investment bank” to funnel credit to small and medium-sized companies.

Such an interventionist approach and the promise to “transform how the financial system operates” is not exactly the best possible advertising for a renaissance of the City.

Labour’s proposal for a financial transaction tax, for example, is fiercely opposed by financial lobbies. It would be based on a model that some EU governments have long debated with no result, with only a dwindling number of countries still professing any interest in the measure.

TheCityUK’s Celic downplayed fears of a Corbyn-led government, noting that in eight of the 10 constituencies with the highest concentration of finance professional voters, “eight have a Labour MP.” That may help convince the party, should it come to power, to go easy on the City.

And, noted the British banker, “a general election is still four years away, so it’s not like Corbyn is knocking at the door.”

But some U.K. political analysts have started speculating on what would happen if May loses on any of the big Brexit issues that parliament will have to vote on — which means that the prospect could be nearer.

But even if Brexit goes smoothly [...] two of its central pillars are about to disappear.

It’s too early to bet on the end of London as a global financial center anytime soon. Its professional know-how, installed base of banks, investment funds and financial services, and the strategic location between North America and Asia, all contribute to the City’s well-being.

But even if Brexit goes smoothly — or “as smoothly as it could, considering the unavoidable trauma,” as a fund manager who was not authorized to speak on the record put it — two of its central pillars are about to disappear.

The London banker’s (understated) conclusion? “Without foreign talent and a friendly government, we’re headed for challenging times.”

This article is part of an occasional series, City of London: Is there life after death?