The general election was a distraction – and look how helpful that turned out to be for our economic prospects.
Tony Ward is chief executive of Clayton Euro Risk
Ok, back to a familiar topic I just can’t leave alone: our financial institutions and Brexit.
Last week, we learned that banks have warned the financial regulator that they will have to push the button on relocation plans for both staff and certain functions unless they get a reasonable idea of the government’s Brexit terms by year-end.
The warnings were made in letters to the Prudential Regulation Authority (PRA), which had asked for details of the banks’ Brexit plans. The PRA is set to give feedback inSeptember. It has been suggested that the regulator will pass an overview of the information it receives to the government as it prepares for negotiations over financial services.
Well, quelle surprise. I’m sorry, but the warnings from financial services have been around for the last year. Little has been communicated by the government’s much-heralded Brexit team about how negotiations will be conducted or what importance it places on financial institutions in this process.
And why wait for September? I know we are entering silly summer season but could this not have been debated when Article 50 was triggered in March? Could we not have gained some sense of the direction of travel before now? The general election was a distraction – and look how helpful that turned out to be for our economic prospects.
Already the HSBC’s chief executive has said that France’s plan to loosen its employment rules make relocating there more attractive. “The package of reforms suggested last week is very, very positive,” Stuart Gulliver said. He reiterated his warning that if Britain were to crash out of the EU without a deal that allowed London-based banks to operate easily inside the bloc, HSBC would move 1,000 jobs. It has selected Paris as the place it will put them, reflecting the fact its owns French bank CCF. “There are about 1,000 jobs out of 43,000 that are employed in the UK that will be unlawful for our activities to be carried out of the UK if it’s a hard Brexit,” Mr Gulliver observed. France plans to scrap the highest bracket of payroll tax for banks and make it easier to sack employees by not requiring bonuses to be taken into account in unfair dismissal claims.
Jamie Dimon, chief executive of JP Morgan Chase, said that the Wall Street bank was set to make Frankfurt its centre inside the bloc but would probably split jobs between Germany, France and Ireland. Precisely how many would leave Britain depended on the Brexit negotiation. Mr Dimon said that the EU would be able to ‘simply dictate’ how many of JP Morgan’s 16,000 employers would leave the UK by deciding what type of jobs it required to be filled by people within the bloc, rather than London.
Dublin emerged this week as the favourite place for relocation, just ahead of Frankfurt. Barclays is in talks with Irish regulators about expanding its presence in Dublin in the run up to Brexit. It is the latest financial company to indicate how it is repositioning to cope with the UK's exit. Barclays said Ireland provided a ‘natural base’ as the bank has operated there for 40 years already. "In the absence of certainty around... an agreement, we intend to take necessary steps to preserve ongoing market access for our customers."
Others are set to follow. I have to say I’m now becoming nervous as to the eventual outcomes of our Brexit negotiations, particularly around financial services. Clarity is needed soon. We cannot afford to lose passporting rights. The hope, of course, is that the UK and remaining 27 countries will agree a deal that replaces passporting with another granting access to each other’s markets. The sceptics among us believe that this, of course, won’t be possible unless the UK makes significant concessions on other issues, including its exit bill.
Well if that’s the case, perhaps it’s a price worth paying.
