-Banks remain cautious over Brexit optimism
As the U.K. government is expected to trigger Article 50 from which a timeline of two years will be begin to finalize and ratify possible deals and the exit process, banks, finance companies, asset managers and insurance firms are already looking for ways to secure their services for the European market.
Despite the growing optimism on the back of stronger growth expectations for this year and next year, there is still a high level of uncertainty clouding investments and creating difficulties for executives to make long-term projections for their businesses. Chancellor Phillip Hammond noted earlier that the the negotiations could well take longer than two years while stressing that secure access for financial sector services to Europe is crucial.
Already, a few banks announced last month that they could move thousands of jobs out of the U.K. The day after U.K. Prime Minister Theresa May confirmed the U.K. would be leaving the single market, HSBC confirmed plans to move 1,000 bankers to Paris. UBS also said the bank could move nearly a third of its workforce, 1,500 bankers, to Europe.
It has been widely reported on British media that U.S. banking giant Goldman Sachs could also move half of its London-Based jobs to Frankfurt or other alternative financial centers due to the Brexit. No final decision has been made yet, however, the concerns of banks and finance companies should be taken seriously and should be the U.K.’s priority in negotiations as many other financial centers are casting their eyes to obtain a better slice of the cake.
In the future, the City of London could have “passport rights” to gain access to European markets by setting up separate capitalized and regulated subsidiaries elsewhere in Europe. However, such moves could well be costly and put financial institutions into a more complex operational position.
Two important members of the EU family - Germany and France remain the biggest competitors to the U.K. when it comes to attracting finance companies across the world.
Last week the Financial Times reported that Paris is preparing to build seven new skyscrapers in its business district as part of an aggressive campaign to lure financial services companies from London after the U.K. leaves the EU. As much as 375,000 square meters of office space, about the size of 50 football pitches, will be built by 2021 as part of the city’s wider efforts to “accommodate the new talent” coming to the city.
Perhaps the most interesting meeting of PM May was with French presidential candidate and former economy minister of Hollande’s cabinet Emmanuel Macron.
“There is no access to the market without budgetary contributions . . . and without respect for the four freedoms of the EU. I will have a series of initiatives to get talented people in research and lots of fields working here to come to France ... I want banks, talents, researchers, academics and so on,” the 39-year-old politician said.
Macron’s comments are important to gauge the general trend and approach of European leaders while the U.K. prepares to start Brexit’s tough negotiations next month. The U.K. government will meet with former partners and new rivals who want more from the divorce bill, which could possibly put off any similar exit demand from existing members in the future.