Going by the sentiments of a high-ranking UK Treasury authority, a second wave of job relocations is in the offing for an array of London-based banks. Some financial institutions will follow in the footsteps of a number of fleeing counterparts in a bid to beat the clock.
With Brexit looming ever so closer, another set of relocations is also on the horizon. At the moment, London-based banks enjoy unrestricted freedom of operation thanks to the convenient passport privileges afforded to them by the EU. Brexit will, however, take away that shade of advantage which has led to a plethora of companies opting out. Financial services director-general of the Treasury, Kathrine Braddick, played down the severity of the consequences but she did acknowledge at a Frankfurt Summit that an aftershock of relocations is likely once the UK’s finance sector is drafted out of the EU’s coverage.
Dublin, Paris and Frankfurt have emerged as possible destinations for a couple of banks based in London with news substantiating that moves are already in the works as computer relocations are allegedly underway. There are about 25,000 related jobs in the UK’s capital and Frankfurt Main Finance says that Germany will scoop up half that figure from the fallout. Ms Braddick, conversely, believes job relocations will be in the region of 10,000 and she attributed the first wave of moves to banks’ attempt at negating the immediate risks so that operations can continue without infringing any legal or regulatory policies.
She further added that the magnitude of the initial moves had been blown out of proportion though she admitted that the relocations will continue once the regulatory framework is established after the exit. She concluded that the numbers of this second wave will depend on the kind of financial accord struck between the departing nation and the European Union which at the moment remains quite unclear.
Finding a compromise after Brexit
Retired Eurogroup president Jeroen Dijsselbloem, also at the same conference in Frankfurt, said that he is hopeful that British and EU regulators would settle on an amicable way forward that would ensure the financial ties aren’t severed and that the current system experiences as little turbulence as possible. He urged that for that to be the case, banking union has to take precedence above all else.
Going by a report in the financial times, things aren’t going according to those wishes. The present state of affairs paints an obscured future as the Bank of England and the Treasury are on opposing sides of regulatory policies and a rift is widening concerning just what each divide believes to be the best course of action. The aforementioned newspaper further adds that while Chancellor Philp Hammond is keen on maintaining much of the EU banking legislation so as to ensure seamless access to the European market for city establishments, the BoE won’t accent to an agreement leaving it at the mercy of the government.
A truce between the pair was only hanging by a thread and is now lying in ruins in light of growing concerns that the planned proposal – which would grant the BoE the ability to forge its own future via regulatory autonomy- is destined to be rejected by the EU. These fears were affirmed in no uncertain terms by Michel Barnier, the chief negotiator for the body who said such an agreement was “as good as dead”.
A slender ray of light still emerges from the overwhelming clouds of uncertainty with reports pointing out that Mr Hammond could turn to Brussels to broker a deal over the line an EU trade agreement pertaining to financial services. This acrimonious deal serves as the backup plan and it would see the city hand over a significant amount of financial power to their neighbours.