In order for Britain to avoid a systemic economic meltdown, the U.K. government was urged to consider extending Brexit negotiations to a five-year transitional process by London’s financial bosses.
In a meeting with MPs at the Treasury select committee, calls for the U.K. government to clarify its future relationship with the European Union (EU) were renewed by the chief executive of the London Stock Exchange (LSE) and HSBC chairman.
By the end of March, the formal divorce procedures from the EU has been pledged to t be started by U.K. Prime Minister Theresa May. However, a two-year negotiation process insufficient in protecting the country’s financial industry because it would be “too short”, according to the projections of LSE Chief Executive Xavier Rolet.
“The economic system (in London) is like a Jenga tower… you don’t know what will happen if you pull pieces out,” Douglas Flint, HSBC chairman, told MPs on Tuesday.
“There are two risks to jobs. One is we move the jobs, the other is the jobs are simply eliminated because the market opportunity (in Europe) is unattractive,” he added.
Regarding the precarious position of London’s economic system with Brexit on the horizon, he agreed with Douglas Flint’s “Jenga tower” description, Mark Carney, Bank of England governor, said.
“I think that the financial stability risks around that process are greater on the continent than they are for the UK,” Carney said.
“I’m not saying there are not financial stability risks to the UK, and there are economic risks to the UK. But there are greater financial stability risks on the continent in the short term, for the transition, than there are for the UK.”
In the event passporting rights for the British financial sector could not be guaranteed post-Brexit, HSBC, Europe’s largest bank, had reportedly been considering moving 1000 jobs to Paris. The U.K. based lender would regard France as the most attractive European destination, Flint reaffirmed to MPs attending the committee. He suggested the bank could even consider taking “pre-emptive action” to relocate some of its operations, given HSBC has integrated services in Paris.
Recently a EY study has projected 232,000 jobs could be lost from the U.K. if euro-denominated clearing is forced out of the country and LSE boss Rolet also cited that EY study to MPs. Rolet added that New York would be best placed to reap the benefits of any derivative clearing too and stressed that London was in danger of losing its global leadership title.
London’s businesses would be enabled to maintain stability by a five-year transitional period, after Article 50 had been invoked, Rolet and Flint told the committee.
To allow businesses to adapt to the demands of the U.K.’s departure from the EU, there was a case for an “implementation phase”, May suggested in December.
“Without a clear path to continued operation of our global businesses our customers simply would not wait,” Rolet said.
(Adapted from CNBC)