A number of big banks have voiced their concerns regarding Brexit and the status of their offices in London in the aftermath of the vote. As a result some of them have put their hiring plans on hold and are now setting their sights upon their next prime location outside of the UK to serve European clients.
The government of Theresa May is not rushing to file the divorce papers yet and is not considering taking big risks in light of what is at stake. The patient approach of the new Prime Minister is testament that the country is slowly evaluating its options and is gearing towards a pretty lengthy process.
Once set in motion, a Brexit will not be reversible unless all European Union members choose to agree to stop the process. According to the latest estimates, the actual exit of the UK from the EU might not be a fact sooner than 2019.
Major Banks Planning for the Worst
With the majority of investment banks in Europe being headquartered in London, moving jobs away from the UK capital has been on their to-do list since the end of June. However in light of the Brexit vote several firms have drawn out contingency plans in order to be prepared for what currently seems inevitable.
The new UK government will need several months in order to clear a murky timeline of the exit process. In the absence of a clear plan to conserve the status of London as the European financial capital, companies in the financial industry are preparing for the worst case scenario, where they lose passporting access to the single European market and have to relocate their services to serve a number of European clients.
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Do Banks Need to Move from London Already?
UK Prime Minister Theresa May has been vocal about maintaining passporting rights for London. However the rhetoric from the European Union has not been very enthusiastic about the prospects. For the time being it’s business as usual. However big banks are not likely to act on the assumption that politicians and key negotiators are going to somehow miraculously save the day.
This week a Bloomberg report has cited sources familiar with the thinking of top UK banking execs, who have been “privately discouraged that seven weeks after the referendum, the ministers in charge of negotiating the best deal for the U.K. believe they can retain the benefits of being in the single market without accepting the free movement of EU citizens.”
Uncertainty Warranted in Every Aspect of the Industry
Bloomberg’s report is spot on when it comes to top executive thinking – they don’t usually trust what politicians say, especially in the current environment, where banks are treated as guilty until proven innocent. Not that there are no reasons for the current status quo, but London’s financial industry is now facing a long period of uncertainty. If there is anything that financial markets professionals don’t like, it is precisely this.
Predictability is the key to maintaining a sound business in the financial industry, and the City of London is a special case. Because of the concentration of capital and talent, the status of the UK capital on the European financial markets is too important for the government to ignore.
That said, European leaders are looking forward to creating their own financial powerhouses – France, Germany and Ireland are loving the opportunity to take away from the UK’s dominant position.
Britain’s exit from the European Union is likely to be a lengthy process. While many in the industry are looking for consolidation in the jobs space in London, it hasn’t yet started. There are those who think that it might never start.