Tabloid headlines are keen to highlight the disunity in Theresa May’s cabinet over Brexit policy. A 21-month transition has now been agreed between the UK and EU, but there is no provision to extend the period if the future trade talks are not all wrapped up in time.Throughout the transition phase, Britain will have to abide by EU rules, particularly freedom of movement.The UK will be allowed to negotiate new trade deals elsewhere during the transition period. The UK will fall out of the bloc at the end of March 2019 under the terms of Article 50, which Theresa May triggered nearly a year ago.Yet while politicians argue over single markets and hard borders, financial services companies which will have to do business in the post-Brexit era are making difficult decisions about whether to leave London, how many staff to relocate and how quickly to move.When it comes to the timetable and detail about how and when Britain will leave the EU, there is continuing uncertainty.The governor of the Bank of England, Mark Carney, has urged companies to start planning, rather than hoping for a soft Brexit. As a result, many banks and insurers have already set relocation plans in motion.

---

Relocate's Brexit Challenges workshop on Friday 28 September will address current global mobility challenges including Brexit, setting up in a new dominion, relocation policy design, various aspects of risk management as well as talent management, diversity and inclusion issues. Find out more here.

---

An uncertain future for the financial services industry

Britain’s huge financial services industry will be deeply affected by the eventual Brexit deal. Britain is the base for the biggest number of banks in the world and is home to the largest commercial insurance market.Many of these companies have already announced that they will be moving from London, in order to be able to continue their operations within EU rules and legislation.About six trillion euros (£5.3 trillion), or 37 per cent, of Europe’s financial assets are managed in London, double that of Paris. London is also the biggest player in Europe’s 5.2 trillion euro investment banking industry.Around 1.1 million people work in Britain’s financial sector and it is an important source of corporate tax revenue for the UK government.London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($2.1 trillion) of assets out of the UK on Brexit, according to think-tank Bruegel.This would have a very significant impact on the UK economy as the financial services industry creates an estimated £190 billion worth of value a year, equivalent to around 12 per cent of the total UK economy.

What’s at stake following Brexit?

Financial services companies in the City of London have been lobbying hard for politicians to secure a bespoke deal for the financial services industry, amid warnings of a loss of tax, income and jobs in Britain.If Britain were to leave the EU with no deal at all, this would impact on Britain’s reputation as a world financial centre and financial safe haven. Although London would continue as the centre of domestic and retail banking, its international and investment banking operations might relocate elsewhere.Under the current passporting rights, finance firms can offer financial, advisory and trading services to corporate clients across all EU states via just one local licence. Prime Minister Theresa May has said these rights won’t be preserved.This is a key concern for banks, as it will mean they will need to obtain additional authorisation in the areas they operate in.

---

Related articles from the Spring 2018 issue of Relocate Magazine:

• What would a hard Irish border mean for UK and EU trade?
• Post-Brexit Dublin: the city of opportunity?
• What can data analytics do for the global mobility sector?

---

Banks considering relocations

Although withdrawal from the EU is some time away, and many issues remain unclear, banks cannot afford to wait. Central to the issue around financial services relocation is the access to European markets which will be denied to UK firms if a deal cannot be reached.A Reuters survey in September 2017 put the estimated number of financial jobs which will either be moved from Britain or created overseas at 10,000 over the next few years. Predictions are that the process will be a “slow trickle” of jobs leaving, rather than a single dramatic exit.The concern is whether EU officials will impose rules to require investment banks to move positions from London to continental Europe if they want to retain their role as primary dealers, trading in bonds, for EU governments after Brexit.According to the Global Financial Centres Index (GFCI), which measures the attractiveness of financial centres, London and New York remain in first and second places in the world.Despite the ongoing Brexit negotiations, London only fell two points, the smallest decline in the top ten centres. Hong Kong has moved just ahead of Singapore into third – only two points ahead on a scale of 1,000. Tokyo remains in fifth. Frankfurt is in 11th, up 12 places, while Paris is 26th, up 3 places in the rankings.“Overall assessments for the European centres continue to fluctuate as people speculate about which centres might benefit from London leaving the EU,” the report says. “However, the majority of centres in the region rose in the ratings, with Stockholm, Copenhagen, and Vienna all showing strong performances.” Nat Davison, partner at Frontierpay, which organises international money payments and forex services, says that for banks, “pragmatism will win the day” when it comes to relocation.“For a global professional, moving from London to Europe might not be such a profound move,” he says. “If you are single and in your 20s you might take it as part of career development.” Staff with families have different considerations, though, he says.“For many of these people, the issue is around schooling and whether there are sufficient places at enough high quality international schools for their children to have a good education in their new location.”

The Likely impact

Brexit is likely to result in a significant upheaval as banks, clients, market infrastructure and regulators simultaneously carry out their plans to prepare for the UK’s departure from the EU, according to PwC.In its report: Planning for Brexit: Operational impacts on wholesale banking and capital markets in Europe, PwC says establishing a banking operation in a new location can take two years.It involves “setting up a legal entity, obtaining regulatory approvals for the banking operation, finding suitable office space, hiring new staff, and setting up operational processes and supporting technology to facilitate the day-to-day operation of the business.”Where activities are being transferred to a new location, the bank will need to recruit staff locally, relocate existing staff to the new location, or adopt a mixture of the two approaches, PwC says.Ifa bank is winding down some activities in a location (either by transferring them elsewhere or ceasing some activities altogether), it may need to consider headcount reductions. “All of this must be done in accordance with local employment law and (particularly relevant when relocating staffcross-border) immigration rules.”A key consideration is that after Brexit those staffthat do remain in London may not enjoy the same freedom to move and work as they have done in the past.

Think outside the box

Explore what the future holds for global mobility teams. Don’t miss our Festival of Global Mobility Thinking on 11 May 2018. The full-day interactive event will feature a host of speakers, exhibitors and roundtables to explore how innovation and new technologies are driving companies through a rapidly evolving business landscape. Book now.Gala Awards Dinner, Thursday 10 May: Join us for a night of celebration at the UnderGlobe beneath Shakespeare’s Globe Theatre, London SE1 9DT. Book here.

---

Read more about how Brexit is impacting UK financial services in the Spring issue of our magazine

---

For related news and features, visit our Brexit section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory  _{©2018. This article first appeared in the Spring 2018 edition of Relocate magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.}