A survey of UK bankers conducted in September found that 72% were confident that London would still be the financial centre of Europe in five years’ time. However, 60% expect increased compliance costs and red tape because of the Brexit vote.
Global financial services consulting and technology services provider Synechron asked 80 financial services executives working in capital markets in banks based in the UK their views of the short- and long-term impacts of Brexit, conducting the research in partnership with researcher The TABB Group.
Among the other key findings:
- Fifty-five per cent of British banks have set up ‘Brexit Steering Committees’ to prepare for life outside the European Union (EU), while 56% of senior UK capital markets executives believe that compliance costs will increase following Britain’s decision to leave the European Union (EU).
- Seventy-eight per cent of executives agree that Brexit will have a negative impact on UK financial markets, while 82% also believe the EU will be negatively affected by Brexit.
- Just over half believe that Britain is well positioned to negotiate a bespoke trading relationship with the EU that is tailored to the interests of the UK.
- Nineteen per cent of respondents believe that the UK should pursue the ‘Norway option’ and negotiate to remain part of the European Economic Area (EEA) while 18% believe the UK should follow the ‘Swiss model’ in its future EU relations and negotiate bilateral treaties.
Synechron has previously estimated that it would cost an average of £50,000 (US$61,000) per employee to relocate staff from London to another European financial centre
Commenting on the findings, the group notes: “This might suggest that despite the current drop in the value of the pound and the pain that some companies are experiencing, many believe the implications [of Brexit] won’t be as significant in the long-term.
“However, with the British Bankers Association [BBA] saying recently that large and small banks are considering their options outside of the UK, it is clear that some are not willing to wait and see what deal the UK government agrees with the EU.”
“Banks are no longer waiting for the government to trigger Article 50 and have begun setting up steering committees to plan for life outside the EU, with some already considering relocating staff to other cities around Europe,” said Tim Cuddeford, managing director at Synechron Business Consulting.
“Whilst Brexit poses an unforeseen challenge for financial institutions, the prospect of rising compliance and huge relocation costs appear inevitable. Despite this uncertainty, we’ve found that the majority of British bankers believe that London will remain the financial centre of Europe, painting a very hopeful picture of the future.”
Amsterdam-based colleague Joost Loves added: “While the UK focuses on the impact of Brexit on London, undoubtedly, Brexit will also have a rippling impact on continental Europe as well. Businesses are evaluating their global footprint in other key markets like Frankfurt, Amsterdam, France and others, and the workforce composition in these cities are likely to change.
“Whether London pursues the Norway option or the Swiss model will be a nod to what regime the financial centre views as a better model. And, perhaps most importantly, the rift between the UK and continental Europe is likely to widen.”