Leading banks are heading for a London exit

Leading international banks are planning to move their offices out of Britain in early 2017, after the Brexit vote raised questions about the future dominance of Europe’s top financial capital.

Prime Minister Theresa May has promised formal talks to leave the EU by the end of March 2017 after Britain voted to leave in a referendum last June.

While May says her aim is retain access to the single market, several EU leaders have insisted that will depend on Britain accepting free movement of workers from the EU, a condition Britain has rejected.

London banks depend on a European “passport” to serve clients across European Union from one base and lenders worry that this right will end after Brexit.

Most of the world’s major banks have their European headquarters in Britain, where the financial sector employs more than two million people. London and the southeast account for more than 40 percent of total tax liabilities.

The uncertainty facing the UK’s relationship with the European Union, Anthony Browne, the chief executive of lobby group the British Bankers’ Association, said, is contributing to the move.

In an opinion piece in the Observer newspaper, Browne said businesses could not wait until the last minute.

Many are fearing that hard Brexit may mean the UK leaving both the single market as well as the customs union, which could potentially reintroduce tariff and non-tariff restrictions on British imports and exports.

Banking is Britain’s biggest export industry by far and the current trajectory threatens not just tariff-free trade, but the legal right of banks to provide services, he said.

“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.

“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.”

Browne is worried that Brexit supporters believed banks did not need European passporting and could rely on so-called equivalence, under which the EU can allow access for countries whose regulations are similar their own.

“The EU’s equivalence regime is a poor shadow of passporting, it only covers a narrow range of services, can be withdrawn at virtually no notice, and will probably mean the UK will have to accept rules it has no influence over,” he added.

“For most banks, equivalence won’t prevent them from relocating their operations.”

French president, François Hollande, is among those who have insisted in recent weeks that Brexit would mean reviahome.com “hard negotiation” and Britain will need to “pay the price” of leaving.

Reuters reported earlier on an advertising campaign launched by the French to lure business from London.

Billboards showing a green frog wearing a tie sporting the colours of the French flag and the slogan “Tired of the fog? Try the Frogs! Choose Paris La Defense” are showcasing the French capital’s business district.

Marie-Cecile Guillaume, director general of Defacto, a public body involved in managing La Defense, said the campaign aimed to roll out “the blue, white and red carpet for thousands of professionals now seeking new European headquarters”.

According to the Guardian, the industry body TheCityUk says 70 000 financial jobs could be lost if Britain leaves the EU without a settlement in place for the City of London.

While banking may be losing, those who have benefited from Brexit include overseas buyers of property, corporate lawyers, some exporters, stock market investors and the tourism industry.

London’s property market is still shaky four months after Britain’s vote to leave the EU, but its resilience is largely due to overseas investors who have taken advantage of falls in the value of the pound.

Foreign holidays have become more expensive for Brittons travelling to Europe, the cost of imports is rising and there are fears about the impact on the economy and the public finances in the longer term.

Banks, however have already confirmed that they are making contingency plans to move some of their operations to continental Europe if Britain does not negotiate access to the EU single market after Brexit.

Corporate law firms and consultancy groups have reaped the benefits already by charging for Brexit-related advice.

But the gargantuan task facing the UK in striking a good Brexit deal with the EU has been put in stark relief by the apparent collapse of the proposed EU-Canada trade pact.

According to Bloomberg, chancellor of the Exchequer Philip Hammond is facing a fiscal hit if bankers carry out their threat to quit London. Tax coffers will certainly suffer if banksjobs and operations shifted overseas in order to ensure continued access to the European Union.

The fiscal challenge was underscored on Friday, when official figures showing the government’s target of cutting the budget deficit to below 3 percent of gross domestic product in 2016-17, is not being met.

The Sunday Times reported that advisers to the premier have a plan ready to slash corporate tax to 10 percent from 20 percent, as possible a “nuclear option” should the EU block a free-trade deal or deny financial companies access to the single market.