International

Banks begin London exodus as hopes of transitional deal fade

A worker arrives at his office in the Canary Wharf business district in London February 26, 2014. REUTERS/Eddie Keogh

LONDON: Britain may have left it too late to convince major banks that it can strike a deal to soften the impact of Brexit before they start shifting jobs from London. Top executives at five of the largest banks in the capital told Reuters a staggered deal on leaving the European Union is only likely to be agreed late on in talks with Brussels, meaning they have already begun relocating staff.

And a more conciliatory government tone toward business, having largely refrained from engaging with corporate leaders about Brexit ahead of last month’s election, may be too late.

“The timeframe for when we wanted a transitional deal has already passed,” an executive at one global bank said, adding it had taken a decision to move hundreds of roles to continental Europe regardless of what the government does.

Finance Minister Philip Hammond said last week that Britain should push for a transitional deal to help businesses, while the government held its first high-level meeting with corporate leaders in months to discuss Brexit.

But James Bardrick, the U.K. head of U.S. bank Citi, said the government has been too slow to get any early deals with Europe and banks will have to be ready by September 2018. “There’s been a lot of talk and not a lot of action for a long time. I am anxious it is all a bit late.”

Executives say the timetable to relocate staff and operations is tighter than it looks because it could take longer than 18 months to set up new buildings, get licenses, hire or relocate staff and build up the capital of EU divisions.

The chair of one of Britain’s largest banks told Reuters he recently resisted pressure from staff to enact his company’s contingency plan, but he will probably have to give the go-ahead by the end of the summer.

“Every single day I have people coming into my office asking me to press the button on contingency plans,” he said.

Bank of England Gov. Mark Carney has also previously said that banks will have to begin relocating activities to other countries by September. Carney has asked banks to show by Friday how they can avoid their customers being abruptly cut off after Brexit, which bankers say may inadvertently speed up the departure of jobs from Britain.

The Department for Exiting the European Union did not immediately respond to a request for comment.

The U.K. has yet to ask for a transitional deal and any plans are likely to face opposition from euroskeptic British lawmakers who view it as delaying exiting the EU.

Executives are pessimistic about Britain getting a bridging period until late in the talks – if at all – because they say it must first agree with the EU its exit terms, notably the rights of expatriate citizens and any money it owes.

An executive at a large British bank said many Britons are not prepared to pay an exit bill, which is likely to lead to a protracted row that will delay agreement on other measures.

Only then can Britain move on to discuss a future deal and possible transitional arrangements, and any deal is likely to be complicated because Prime Minister Theresa May has rejected the authority of the European Court of Justice.

“Jobs are moving out of the city by the day. Even by the turn of the year, a transition agreement will be too late.”

James Palmer, a senior partner at law firm Herbert Smith Freehills, said many banks have accelerated plans to relocate parts of their businesses after the inconclusive results of last month’s general election because it has increased the likelihood that Britain walks away without a deal.

“Therefore getting a transition committed now is absolutely fundamental,” Palmer said, adding that if politicians did not take this on board they “will have failed, and will have failure on their tombstones as their legacies.”

 
A version of this article appeared in the print edition of The Daily Star on July 12, 2017, on page 5.

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