Brexit: Top banks prepare to leave London
London’s continuing status as the capital of global finance is in doubt with Britain’s biggest banks preparing to relocate outside the country by early 2017 as Brexit-related discourse increasingly suggests that banks and other FIs will not able to retain EU-wide access.business Updated: Oct 24, 2016 11:08 IST
London’s continuing status as the capital of global finance is in doubt with Britain’s biggest banks preparing to relocate outside the country by early 2017 as Brexit-related discourse increasingly suggests that banks and other FIs will not able to retain EU-wide access.
Anthony Browne, chief executive of the British Bankers Association, raised the ante on Sunday by claiming in The Observer that the biggest banks were preparing to leave in the first few months of 2017, while smaller banks were planning to leave before Christmas.
“Most international banks now have project teams working out which operations they need to move to ensure they can continue serving customers, the date by which this must happen, and how best to do it”.
“Their hands are quivering over the relocate button. Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year,” Browne wrote.
Prime Minister Theresa May has announced that the formal process of leaving the EU will begin by the end of March 2017. There are already divisions within her cabinet about the extent of links Britain can or should maintain with the EU after leaving the union.
The key issue is Britain’s access to the European Single Market. The access comes with the obligation to allow freedom of movement to EU citizens to move, work and settle in Britain, which the May government is keen to restrict.
Claims and assurances by May and her ministers that they would seek “the best possible deal” from Brussels have failed to assuage London’s financial district, which is preparing for the worst case scenario in 2019, by when the exit from EU is expected to be complete.
Losing access to the European Single Market means the London-based banks and FIs lose so-called ‘passporting rights’ they currently enjoy from Britain’s membership of the EU. The rights allow them to trade across the EU without setting up offices in every member-state.
Losing the ‘passporting rights’ after Brexit means the banks and FIs will need to incur extra expenses to set up offices, as well be subject to tariff, customs and other duties in each of the 27 EU member-states.
“As far as companies are concerned, Brexit has already happened. Companies are already applying for licences and other facilities that they would need to operate across the EU after Britain’s exit is complete”, says acting Indian high commissioner Dinesh Patnaik.
There are over 800 Indian companies in Britain, mostly in London, who use the base to access the EU market. Ficci has already expressed concern over Brexit’s impact on Indian companies at a time when Britain is seeking increasing trade with India.
Browne warned in The Observer piece that both British and European politicians who appear to be pursuing “anti-trade” goals need to recognise that “putting up barriers to the trade in financial services across the Channel will make us all worse off”.
Browne noted that banks based in Britain were currently lending £1.1 trillion, “keeping the continent afloat financially”, which would be at risk. Banking, he wrote, was Britain’s biggest export industry, and that the Brexit discourse threatened not just tariff-free trade but the legal right of banks to provide services.
The financial industry body, TheCityUK, has claimed that up to 70,000 financial jobs could be lost if Britain. Browne noted that delegations from Frankfurt, Paris, Dublin and Madrid were coming to Britain to pitch to bankers to relocate there.
“I am pro-competition, and long may they try to make their labour market and fiscal policy more attractive to international investors. That is not the problem. The problem comes when national governments try to use the EU exit negotiations to build walls across the Channel to split Europe’s integrated financial market in two, in order to force jobs from London,” he added.