Banks in the U.K. will start relocating operations out of the country by year-end, months before formal talks to leave the European Union begin, as London looks set to lose access to the EU single market, the head of the British Bankers Association said in a newspaper commentary.
International banks’ “hands are quivering over the relocate button,” Anthony Browne, chief executive officer of the banking lobby group the BBA, wrote Sunday in the Observer newspaper. “Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.”
Without identifying any banks by name, he said lenders can’t wait until the last minute and have to “plan for the worst,” especially because “public and political debate at the moment is taking us in the wrong direction.”
Prime Minister Theresa May’s government has sought to quell fears of some financial executives that negotiations with the EU will leave the industry without passporting rights, which allow financial companies to sell services freely around the EU. While Brexit Secretary David Davis last week said he is “determined to get the best deal possible” for banks, May has rejected any special arrangement for the City of London in favor of making immigration controls a priority. If the U.K. curbs the freedom of movement of EU citizens, it will lose access to the market, European Commission officials have said.
Restricted access means U.K. financial firms could lose as much as 40 billion pounds ($49 billion) in revenue and put 70,000 jobs at risk, according to consulting firm Oliver Wyman.
May has said she will trigger formal Brexit talks by invoking Article 50 of the EU’s Lisbon Treaty by the end of March. The negotiations could last as long as two years.
Relying on third parties to maintain a degree of access to EU markets will not be not enough to persuade international banks to stay in London, as some pro-Brexit politicians in the U.K. have argued, Browne wrote. Such agreements will only cover a narrow range of services and can be withdrawn at any time, he said.
“The EU’s equivalence regime is a poor shadow of passporting” and “won’t prevent banks from relocating their operations,” Browne said.