What’s Going On Here?
The uncertainty stemming from prolonged Brexit negotiations may have a harmful impact on Britain’s financial stability.
What Does This Mean?
Theresa May’s government are (understandably) taking their time to negotiate favourable terms for Britain’s exit from Europe. However, banks are suffering from sitting and waiting for a conclusion to be reached.
Why Should Firms Care?
Top business leaders have said that the relocation of banking jobs to Europe could have a big knock-on impact on related businesses. This would include accounting firms, insurance providers and (most importantly)… law firms.
Reports have already been raised that some firms have moved workers to Europe, but the number of staff they relocate are generally very low and not to be taken too heavily at this stage. For example, HSBC relocated 1000 staff from London to Paris but once you consider that they have 85,000 employees, it doesn’t seem as drastic.
Having said this, banks are not willing to wait too long. Most are stating that they expect the ‘transitionary period’ to be between 9 months and a year before a clear decision is made. If the uncertainty extends beyond a year, banks will have no alternative but to move abroad which would also affect law firm’s with big banking sectors.
The cause of the problem seems to stem from conflicting interests of the government. Theresa May very strongly stated that “no deal is better than a bad deal”. This statement comes across like she’s fighting to get the best outcome for ordinary British people, which would help her popularity with the general public. But, it will come as bad news for banks who are itching for any sort of certainty on what the rules will ultimately be.
Banks are hoping for common regulation between the remaining 27 EU nations and the UK. This would mean that they would all run under the same rules and regulation, making it easier for European companies to outsource services to Britain. Until we know whether this will be agreed, the future could be turbulent.
Article written by Idin S.
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