London-based banks ‘could relocate to Paris or Frankfurt’

The Brexit vote in the UK referendum could result in some London-based banks being forced to relocate their workforces to Paris and Frankfurt, Jonathan Hill, the EU's financial services commissioner has told German business newspaper Handelsblatt.

City of London banks
With uncertainty growing over the future status of EU expats working in the UK, Mr Hill warned that the vote to leave the EU would have a severe impact on the UK's financial and banking sector. "I've visited London, Manchester and other British financial centres in the past weeks and warned of the consequences of an exit from the EU," he said."Then it could happen that banks and investment funds shift activities and jobs to Frankfurt and Paris."US investment bank JP Morgan has described a Brexit as a "terrible deal" for the British economy and warned it could cut up to 4,000 jobs in the UK. Several other banks have talked of relocating and even HSBC, when deciding to retain its international HQ in London earlier this year, said it might have to move hundreds of jobs to Paris if there were a Brexit vote.Much, of course, will depend on the deal the UK hammers out with the remaining EU, including access to continental financial markets. In March, rating agency Standard & Poor's warned that international banks could refocus their European businesses away from Britain, particularly if the UK was no longer part of the passporting arrangement, which allows credit institutions from EU countries to carry out their business in another member state without having to obtain an official authorisation from the relevant regulator.
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"A vote to leave would result in complex, prolonged negotiations with the EU over the terms of the UK's exit, with considerable uncertainty over the outcome," said S&P.Now that there has been a Brexit vote, there is also uncertainty over the status of expat employees. Mark Quinn, head of Mercer’s Talent business in the UK, said, “The immediate implications for companies and employees will depend on their circumstances. In the short term, companies should be analysing exposure they have to the UK and Europe in respect of their workforce’s organisational profiles and their reward plans."While we don’t know yet what restrictions will be imposed on, say, the free movement of people, it is evident that political, economic, legislative and market uncertainty is unlikely to clear any time soon. Strong employee communications will be critical for companies over the coming months.“It’s likely that restrictions will be placed on EU workers within the UK workforce so companies should review their workforce plans, particularly retail, leisure and services employers who employ a large number of EU citizens. New bi-lateral agreements may be required for those organisations off-shoring from the UK into the EU and we will also have to wait and see if non-UK multi-nationals will think it still appropriate to have their European headquarters remain in London.   “UK companies will have to gear up for likely change in UK employment and labour market regulation and certain elements are likely to become more favourable to employers, although this may well create a more turbulent employee relations environment. The UK banking sector is likely to seek changes in banking regulation, particularly as it affects pay. We may see an end to the bonus caps and other EU-sponsored controls although the Financial Conduct Authority and Prudential Regulation Authority will want to ensure that the direction and spirit of the Financial Standards Board’s requirements continue to be fully met in the UK.“The restrictions and changes in the UK labour market for key skills at both executive and employee levels will impact on competitive pay levels in the UK and, of course, there may be an increase in costs for UK workers living and working within the EU, so companies will have to respond to that.”Jules Quinn, a partner at King & Spalding, said that companies in both the UK and EU employing expat staff should establish an 'employment audit' following the Brexit vote, to prepare for significant legislative changes.“Companies should be undertaking an employment audit of current staffing in the UK and the EU to plan for the new systems and reduce potential risks. Companies should be assessing which employees will potentially be required to apply for a work permit if there is a repeal of the current EU immigration rules," Ms Quinn said.“Businesses need to review their existing contracts to see what EU derived rights have been woven into them, such as holiday pay and working time in existing employment agreements and TUPE provisions in property management agreements. There are questions over what post termination restrictions and references to geographical limitation there will be as well as currency, market volatility and where to locate businesses.” Mark Mitchell, CEO of recruitment firm Meridian Business Support, added, "I expect we will experience a significant lack of investment in major industries as other countries won't want to trade with the UK. Brexit means we are isolating ourselves and we may not seem favourable to other countries.“The result makes us appear to be less friendly and tolerant and has turned many of our workforce into official immigrants than colleagues – this will have a detrimental effect on staffing.“Brexit will have a major impact on start-ups and businesses. The economic impact will be damaging as we have cut ourselves off from a valuable source of skilled labour and we may have cut ourselves off from the single market. It’s going to take a lot of time, money and effort in order to get new trade agreements up and off the ground.“But we have to respect the vote, and get on with it.”

Read analysis of what the vote to leave the EU may mean for for the global mobility industry in Brexit is a reality – a new era for global mobility? by Relocate Global's managing editor, Fiona Murchie.

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