Davis Intervenes As UK Finance Sector Votes Leave
UK Brexit Secretary David Davis has laid out his plans to keep major banks in London, as the sector mulls plans for a mass European exodus.
Davis made a series of comments at a UBS conference in London, designed to keep banks on side. He made a particular point of reaffirming his desire to let banking sector workers move freely between offices in the UK finance sector and the EU, a point of continued concern.
“We want to ensure that our new partnership with the EU protects the mobility of workers and professionals across the continent.
“Whether this means a bank temporarily moving a worker to an office in Germany or a lawyer visiting a client in Paris, we believe it is in the interests of both sides to see this continue.”
Davis has sought to highlight the need for a swiftly established regulatory scheme, helping to clarify the relationship between financial institutions in the two territories. He also stressed that the UK will do all it can to help attract talent to the sector after the Brexit process.
“An implementation period is not the only area where we’ve listened and taken the concerns of businesses on board…Ensuring that the financial services sector can attract the talent it needs to thrive is also vital as we leave the EU.”
The main sticking point for banks is the issue of ‘passporting rights’. EU wide agreements currently allow UK banks to offer a range of financial services across Europe, but these are seen as precarious, given that Brexit negotiations have failed to make meaningful progress.
In spite of Davis’ reassurance, many banks have spoken openly about their plans for relocation. One member of the German Central Bank executive board has made it clear that banks in London are planning for a worst case scenario ‘hard Brexit’ outcome.
The Chief Executive of Goldman Sachs said in July suggested that the bank could move its headquarters to Germany, likely to Frankfurt. The CEO of HSBC meanwhile has warned that 1000 staff will be moved to Paris in the event of a hard Brexit.
JPMorgan, Deutsche Bank, UBS, Credit Suisse and Standard Chartered have also all spoken of interim plans to relocate staff following a poor Brexit outcome. Paris, Frankfurt and Dublin are all seen as favoured destinations, with each boasting strong regulatory frameworks and incentives for the finance sector.
Germany is a particularly good bet for the financial sector. With Angela Merkel being reelected and growth rising to 0.8% last quarter, the country offers particular political and economic stability.
Whether or not Davis is successful, Brexit is predicted to lead to some financial casualties. UK clearing houses are unlikely to be allowed to fulfil transactions in euros, a major source of tax revenue for the City of London. It remains to be seen whether the prestige and power of London will be enough to retain its world-leading finance sector.
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