While the U.K. politicians are struggling hard to finalize a trade deal for Brexit by early next year to so that businesses’ panic are eased, it may be too late for some industries.
Sources in the famed global banking sector London have said that the sector wants to make sure that they would be able to possess new offices inside the European Union, up and running, by the time the U.K. exits and this plan is slated to be put into practice early next year, excluding the possibility of some major breakthrough. Sources have also said that persuading lenders from implementing their contingency plans would be hard for Prime Minister Theresa May.
“If there is no precise direction at the beginning of next year, I would say that the banking industry players would have to take decisions, early decisions in the worst-case scenario,” Societe Generale SA Deputy Chief Executive Officer Severin Cabannes said earlier this month. Cabannes added that 300 new roles in Paris is intended to be created by the bank. We would need “about one year to make that transformation movement.”
Sources have also said that the first quarter of next year would be the time when the shifting of people, infrastructure and capital would be initiated by firms including Goldman Sachs Group Inc., Morgan Stanley, UBS Group AG and Royal Bank of Scotland Group Plc, to their selected hubs in other parts of the EU because the Brexit talks have been in deadlock for months now. Banks implementing their contingency strategies would reportedly need a time frame of at least 12 months for starting full-scale operations in the alternative business hubs in the EU, and to equip the centers with adequate numbers of senior employees, even though all of the lenders would ideally want to either delay, or better still, avoid using such plans because it would cost the banks about more than $500 million on an average for every firm.
“It’s the very beginning of next year when we need to have a clear view on what’s going to happen,” Sylvie Matherat, chief regulatory officer at Deutsche Bank AG said earlier this month.
She said that banks will have to get ready for the worst in case no Brexit deal is arrived at soon.
Striking trade deal or transitional arrangement between the two parties is the worst scenario for the banks. A “legal consequence” of U.K.’s divorce would be the lost access to the single market for the U.K. based banks, EU chief Brexit negotiator, Michel Barnier said on Monday.
A two-year transition deal would be negotiated in order to uphold the competitiveness of Britain’s financial district, said a determined U.K. Brexit Secretary David Davis recently. But for the banks, it might to too late already. And 2018 has already been identified as “the point of no return” for U.K. banks who have been advised to trigger their contingency plans by that time and begin moving people, EU regulators have said. And this is the message in general that the U.K> banks are getting from the EU negotiators.
(Adapted from Bloomberg)