Big banks are said to be getting ready to move some operations away from London amid uncertainty over the Brexit. Meanwhile, a newspaper reported that the UK could threaten the EU with slashing corporation tax.
Large financial institutions are preparing to move some operations away from Britain in early 2017 due to mounting concerns about the possibility of a “hard Brexit.”
Anthony Browne, chief executive of the British Bankers’ Association, said the country’s future relationship with the European Union was mired in uncertainty. He said the public and political debate was “taking us in the wrong direction.”
“Most international banks now have project teams working out which operations they need to move to ensure they can continue serving customers, the date by which this must happen, and how best to do it,” said Browne in Britain’s “Observer” newspaper.
“Their hands are quivering over the relocate button. Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.”
Many major international banks have their European headquarters in Britain, with the financial sector employing more than two million people and making up about 12 percent of the economy.
Passporting v equivalence
London’s banks rely on a system of “passporting” – available to all members of the European Economic Area – to serve clients across Europe. Browne expressed concern that pro-Brexit UK ministers have suggested this would not be needed, and that London could rely on so-called “equivalence,” which allows non-EEA actors to have access to European markets.
“The EU’s equivalence regime is a poor shadow of passporting, it only covers a narrow range of services, can be withdrawn at virtually no notice, and will probably mean the UK
will have to accept rules it has no influence over,” said Browne. “For most banks, equivalence won’t prevent them from relocating their operations.”
In the wake of the June referendum vote to leave the EU, Prime Minister Theresa May says she will invoke Article 50 to begin the process of leaving the EU by the end of March 2017. While she has expressed keenness to remain part of the single market, a number of EU leaders have insisted this would depend on Britain accepting free movement of workers from the bloc.
Holding a crucial card?
Meanwhile, the “Sunday Times” newspaper reported that the government was considering slashing corporation tax from 20 percent to 10 percent if the EU refuses to agree a free trade agreement with the UK. Such a move could damage the EU by luring firms from the bloc to Britain.
The newspaper said the idea had been proposed by advisers to Prime Minister May. “People say we have not got any cards,” the paper quoted an unidentified source as saying.
“We have some quite good cards we can play if they start getting difficult with us. If they’re saying no passporting and high trade tariffs, we can cut corporation tax to 10 percent,” the source said.