Big British Banks Falling over Themselves to Flee London
It’s a stampede in the wake of the Brexit vote; it seems many banks want to be out of the British capital by the end of 2017. The banks fear uncertainty, as negotiations between Britain and the EU do not bode well so far. Anthony Browne, president and CEO of the British Bankers’ Association, wrote in the October 23 edition of The Observer that the public and political debate on Brexit is leading Britain in the wrong direction. (Source: “Brexit politicians are putting us on a fast track to financial jeopardy,” The Guardian, October 23, 2016.)
Sources from the Ministry for Brexit—yes, there is such a thing—tried to calm bankers and investors, explaining that Brexit Minister David Davis and Chancellor Philip Hammond have already assured international banks. According to Browne, the banks have already begun to take contingency measures to ensure their customers would not end up without access to services by the date within which the move has to happen. (Source: Ibid.)
Advertisement
Some of the Biggest Names in Banking Have Not Wasted Any Time
Goldman Sachs is said to have already threatened to move its 2,000 employees out of Britain if the U.K. renounces the EU’s Free Movement principle, which gives people in the EU the right to freely live and conduct business in any EU member state without needing a work permit or visa. (Source: “Goldman Sachs, JPMorgan, Morgan Stanley mull London exodus,” CNBC, October 10, 2016.) Clearly, if Goldman leaves, its competitors will follow suit, fearing uncertainty in the post-Brexit U.K.
Browne is especially concerned because he sees preparations for an early departure for all major banks as inevitable. The banks cannot afford a last-minute decision, based on what kind of Brexit the British government will adopt. So they have to consider the worst-case scenario, which is to leave. (Source: The Guardian, op cit.)
This raises the question of whether or not banks would still enjoy the so-called “passport rights” as they do now under EU regulation. These allow U.K.-based banks to offer financial services to companies and individuals throughout the EU without barriers. Brexit Minister Davis and Prime Minister Theresa May have offered somewhat contrasting views. Davis has promised to pursue the best deal for the banks, while May has shown less willingness to grant London a special ‘free movement’ status.
Now, are the banks threatening to leave the U.K. just because of Brexit? Brexit is the catalyst, but there is another lesser known reason. In fact, British banks might be threatening to leave the U.K. because May has not repealed an eight percent tax on their profits. (Source: “British banks call for end to surcharge on profits amid Brexit uncertainty,” Reuters, October 20, 2016.)
Therefore, the bankers in London want to safeguard their interests in the wake of Brexit. But, the British banking sector’s rush to the exits might have more to do with that word we all know too well: taxes.
