IN FINANCIAL circles, the shock at the news that Britain has voted to leave the European Union can be felt well beyond the City of London. Across the Channel, financiers from Frankfurt to Milan are expressing regret, sadness and disbelief at news that very few had expected. “Everyone feels disheartened and sad,” says Marie Owens Thomsen, chief economist of Indosuez Wealth Management, the private banking arm of Credit Agricole, who fears dark days lie ahead for Britain, including a worsening balance of payments and a recession. In addition to Britain’s fate, money-managers on the continent are worrying about volatility (and buying opportunities), risks of contagion, what Brexit might mean for monetary policy and the euro and how it will reshape Europe’s financial-services industry.

“Of course our stock prices are not making us happy,” says a spokesperson for ING, a Dutch bank, after stockmarkets on both sides of the Channel slumped on the news, “Uncertainty and unrest are never good.” Eric Chaney, head of the research and investment strategy team at AXA IM (or Investment Managers), is getting plenty of calls, especially from institutional investors and from Asia. People want to know whether the City will atrophy; whether Italy will have a debt crisis or itself leave the European Union; whether European banks might enter another downward spiral; whether the euro is in peril again. So far, he says, investors’ response has been rational: “When you have existential questions and no answers, of course you see a flight to safe assets.”

The most pressing question is how closely Europe’s fate is connected to Britain’s. Some see a buying opportunity for European assets and for the euro, which they think are unfairly being dragged down by events in Britain. “Any correction outside of the British market might be the best buying opportunity since 2009,” says Ms Thomsen.

Others fear contagion, both in the short and in the long term. Spreads between the bonds issued by Europe’s most fiscally conservative governments and more indebted Mediterranean spots have already widened sharply (by 0.5% between Spain’s and Germany’s 10-year bonds when markets opened on Friday, for example). BlackRock, a big American asset manager, says it predicts a weaker euro over time, lower European growth, and thus a poorer outlook for European assets. Christian Gattiker of Julius Baer, a Swiss bank, sighs and says he is “worried and closely monitoring the situation”. Beyond the immediate volatility in currencies, he particularly worries about what lies ahead for monetary policy in Europe. Given the lengths the ECB has already had to resort to, he worries that more upheaval might pave the way for helicopter money—the printing of cash to be given directly to governments or citizens, in an effort to stir growth and inflation.

Finally, there’s the question of whether firms will move out of London and whether other European financial centres might benefit. France’s Central Bank governor, Francois Villeroy de Galhau, has already warned that banks in London would lose their “financial passport” privileges once outside the EU, and Eurogroup President, Jeroen Dijsselbloem, said restricted access to the single market would be the “price” of leaving the EU.

While bank bosses are careful not to draw any hasty conclusions, off-the-record, they admit that over time they may well reduce their presence in London. ING’s spokesperson says that his bank will follow its clients and if they want to move to Paris or Frankfurt or Amsterdam “it would be strange not to follow.” “This will reshape the financial landscape in Europe for sure,” says Mr Gattiker. One concern is that there will be fierce competition among several wannabe financial centres, leading to a diffuse and inefficient financial system. With a contentious referendum on constitutional reform coming up in October in Italy, and populists across the continent calling for their own referendums on EU membership, the only thing that is certain is more uncertainty. And whilst hedge-fund managers may like that, most institutional investors do not.

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