UK economy in dire straits: leading banks now officially plan to Brexit too

theresa-may-european-council-2016-tusk

EU Heads of State or Government met on 21 October 2016 in Brussels to address the ongoing negotiations for trade agreements and the modernisation of Trade Defence Instruments. From left to right: Ms Theresa MAY, UK Prime Minister; Mr Donald TUSK, President of the European Council. Shoot location: Brussels – BELGIUM Shoot date: 21/10/2016 Copyright: European Union

At the morrow of the Brexit vote, back in late June this year, one of the first warnings on the possible disastrous effects of the UK leaving the European Union was all about the banking sector. The entire British financial sector was in the eye of the storm and the world’s main media outlets started to whisper about prominent banking groups planning to leave the UK after the vote.

However, nothing more concrete and official ever sounded on the matter until the chief executive of the British Bankers’ Association recently claimed that Britain’s biggest banks are already preparing to relocate out of the UK in just months. This is something that indeed happened only last Saturday.

Background

As reported by the European Sting only days after the British referendum, huge US banking groups such as JPMorgan Chase, Goldman Sachs, Citigroup and Morgan Stanley had started immediately to plan on a relocation outside the United Kingdom as a first consequence of the vote. The “leave” outcome changed everything and forced those groups to work actively on a “plan B” amid concerns of a decrease in business possibilities if they were staying in a country outside of the EU. News and rumours on those scenarios have been following one another until last weekend when the main alarm rang.

Hands are quivering

Anthony Browne, Chief executive of the British Bankers’ Association, made a dramatic statement last Saturday on the Observer Sunday saying that Britain’s biggest banks are preparing to relocate outside of the UK in the first few months of 2017 amid growing fears over the impending Brexit negotiations. According to Mr. Browne, several smaller banks would even be making plans to get out the country 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”, he added. “Their hands are quivering over the relocate button”, he underscored.

Passporting issue

Despite being a crucial matter, with the potential of putting thousands jobs at risk, the relocation risk itself is not where Mr. Browne’s attention focused. His interview with the Observer indeed brought to light what could represent the hottest point of discussion of the EU-UK negotiations in the months to come: passporting. “For banks, Brexit does not simply mean additional tariffs being imposed on trade – as is likely to be the case with other sectors. It is about whether banks have the legal right to provide services”, the BAA chief explained.

Banks in the United Kingdom depend on a European “passport” to serve clients across the 28-country European Union. Big American groups like the ones mentioned above have been running their business from Britain for decades, using its status of member state to then access the other EU markets. The “leave” vote clearly worry big banking groups that this right will end after Britain leaves the EU and that they would no longer be able to run their European businesses based out of the UK.

The next move

Now the British banking sector is preparing its next move, as the industry is clearly determined to seek a continuation of the EU’s “passporting” regime, so to operating throughout Europe without seeking separate authorisation. The match is too important, and Andrew Browne made it clear. “Banking is probably more affected by Brexit than any other sector of the economy, both in the degree of impact and the scale of the implications”, Mr. Browne explained.

“It [banking] is the UK’s biggest export industry by far and is more internationally mobile than most”, he added. A report by the financial industry lobby group TheCityUK indeed shows it all, and reports that the sector generates around 12% of the UK’s total economic output and pays out approximately £66bn in taxes a year. “As an industry, we have asked for some form of that passporting to continue once we leave, enabling customers on both sides of the Channel to continue getting the services”, Browne declared.

The “equivalence regime”

Indeed European Union rules state that some particular deal for accessing the markets at zero tariffs is possible for outsider countries that are in line with the bloc’s ruling system, the so-called “equivalence” regime. Many experts believe that this clause is something the UK could use in the future as an ex-member state. However, Mr. Browne has also warned that in European capitals and among British eurosceptics “the rhetoric is hardening”, and that many could be already trying to ride the wave and stop any possible progress. “The public and political debate at the moment is taking us in the wrong direction,” the Observer Sunday newspaper quoted Browne in his interview.

The job market

“It is understandable that other European cities want to attract jobs from London”, he then added, coming straight to the point. “Delegations from Frankfurt, Paris, Dublin and Madrid are all coming to the UK to pitch to bankers”. French President Francois Hollande almost confirmed how the Brexit could be potentially profitable for his country and other EU member states, just a few days ago. “Britain’s decision to leave the European Union should make us seek even more investments, make us showcase France’s attractiveness”, he told journalists at a FedEx Corp (FDX.N) facility in the Parisian suburb of Roissy last week.

Further, months ago economic news outlets like the Financial Times reported that lawyers close to the financial world confirmed that following Brexit many of the big US banks would likely need a new legal base, and that cities like Dublin, Paris and Frankfurt could be scanned as new potential home bases. “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 a problem”, highlighted Mr. Browne.

Where “the problem” lies

“The problem comes”, BAA’s chief executive said, “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”. “From a European perspective, this would be cutting off its nose to spite its face. It might lead to a few jobs moving to Paris or Frankfurt but it will make it more expensive for companies in France and Germany to raise money for investment, slowing the wider economy”, he also said.

The Observer interview by Andrew Browne had the clear intention to underline how much the BAA is worried by the Brexit. They made it clear already, when before the June referendum, the organisation led by Browne had conducted a survey that showed that a large majority of banks wanted to remain in the Union. Now that the situation has turned to be too complex and alarming to handle, it has become even more important for the BAA to put all cards on table before any of the big groups that are now operating from the City of London relocate their activities under the Tour Eiffel.

Looking to the future

Browne’s interview may be seen also as a pledge to the British financial world for a continuous effort by the BAA to mitigate the Brexit risks, which can really disrupt to Europe’s financial markets, according to him. “That is why we have asked for transition arrangements, to ensure an orderly change-over to whenever the new trade deal comes in”, he said. “The real challenge for business was not the day after the referendum – it will be the day after we leave the EU”, he shouted at the end of his Saturday interview.

UK’s Prime Minister Theresa May has already said she will start formal talks to leave the EU by the end of March 2017, where she will be “ambitious” and will negotiate the “best deal” for the British people. However, Mr. Browne didn’t seem to be so confident in politics at all.

“The political process also makes it difficult for business. Trade talks between the UK and EU will take years to agree and more years to ratify”, said Mr Brown. “In big trade talks, nothing is agreed until it is all agreed, normally at three in the morning. In the meantime, we will have left the EU in 2019”, he then added by the end of his Saturday interview.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Brexit Preparedness: European Commission adopts final set of “no-deal” contingency measures for Erasmus+ students, social security coordination rules and the EU budget

The journey begins – 2021 is the European Year of Rail!

Three experts on why eradicating plastic pollution will help achieve gender equality

Informal meeting of heads of state or government, Sibiu, 09/05/2019

State aid: Commission opens in-depth investigation into public support for expansion of LG Chem’s electric vehicles battery plant in Poland

Rising number of young people excluded from jobs, education and training

Iran protests: Live ammunition reportedly used, says UN human rights office

In dreams and in love there are no impossibilities

Opening Remarks by H.E. Ambassador Yang Yanyi, Head of the Chinese Mission to the EU at the Chinese Fashion Night

EU Facility for Refugees in Turkey: €5.6 billion out of €6 billion now allocated in support of refugees

Forget 2009, this is the real credit crisis of our time

Is there a cure for corruption in Greece?

COVID-19 vaccination campaigns and their challenges

EU Visa Policy: Commission welcomes agreement to strengthen EU visa rules

How to unleash the potential of regions like São Paulo

A comprehensive strategy for Eurozone’s long term growth gains momentum

US-EU trade negotiations: pointless tariffs against real economic growth

A Sting Exclusive: “Paris is the moment for climate justice”, Swedish MEP Linnéa Engström claims from Brussels

The ECB proposes a swift solution for SMEs’ financing

Major UN aid operation for 650,000 gets underway across Syria-Jordan border

Latest leaked TTIP document confirms EU sovereignty may be under threat

Societies must unite against ‘global crisis of antisemitic hatred’, Guterres urges

How powering food storage could end hunger

What are antibody tests and can they get the world back to work?

Education should be like everything else. An on-demand service

A new European banking space is born this year

Smart city experts should be looking to emerging markets. Here’s why

JADE Spring Meeting 2016 highlights

European research priorities for 2021-2027 agreed with member states

Latest tragedy in the Mediterranean claims over 100 lives – UN refugee agency

Parliament demands ban on neo-fascist and neo-Nazi groups in the EU

Memoirs from a unique trip to China: “my new old dragon” (Part II)

We need to rethink cybersecurity for a post-pandemic world. Here’s how

COVID-19 amplifies inequality. Fight back with long-term thinking

How COVID-19 vaccine efforts could help defeat other diseases

Former Chilean President Bachelet put forward by UN chief as next High Commissioner for Human Rights

Young people are key to defusing unrest and restoring public trust

A third of young people polled by UN, report being a victim of online bullying

The reskilling revolution can transform the future of work for women

European Defence Fund: EU funds new joint research and industrial projects

Coronavirus Global Response: EU Humanitarian Air Bridge supports Venezuela

Search Engine neutrality in Europe in danger: Are 160.000 Google filtering requests good enough?

Why we need different generations in the workplace

Mexico: UN chief saddened by pipeline blast in which dozens were killed

Use space technology to build a better world for all, urges UN chief

UNICEF urges ‘transformative shift’ in family-friendly work policies to reap ‘huge’ benefits

EU cracks under the weight of its policy on the Ukraine-Russia nub

We need a global convention to end workplace sexual harassment

Climate Change : An Already Health Emergency

10 reasons to be optimistic for the future, from young change-makers

COVID-19 practices are constantly changing – this app helps emergency doctors cope

After the European Parliament elections – what happens next?

Scourge of slavery still claims 40 million victims worldwide, ‘must serve as a wakeup call’

Chernobyl nuclear disaster-affected areas spring to life, 33 years on

Why the UK government must do more to boost green revolution

UN chief praises Africa for keeping ‘hearts and borders open’ in refugee crisis

OK computer: why the machine age still needs humans

In Bali, UN chief Guterres outlines importance of international financial cooperation for sustainable development

TTIP 9th Round marked by American disappointment: Will some optimism save this trade agreement?

As Dubai switches on its first 5G, what is all the fuss about?

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s