Banks and insurers will wave through “irreversible” Brexit job relocations next year unless the UK government strikes a quick deal on a transition period after March 2019, the leading City trade body has warned.
TheCityUK claims in a report today that the value of a transitional deal after the formal date for the UK to leave the European Union is “disappearing by the day”, as major players are already moving staff from London to the EU.
Miles Celic, chief executive of TheCityUK, said: “EU and UK negotiators cannot delay discussing a transitional deal any longer if they want it to hold any real value.
“Firms are beyond the planning stage now. If they haven’t done so already, most will be ready to press ‘go’ on their contingency plans in the new year.
“They can still take their foot off the accelerator if a transitional deal is agreed, but without progress soon, it may be too late. Once businesses start moving, there is no reverse gear. It is simply not efficient or economically viable to move operations twice.”
The body says in its report that an agreement on a transition deal needs to be reached “at the latest” by the first quarter of 2018 to avoid the worst outcome.
TheCityUK’s warning is in contrast to its more relaxed position on jobs relocation in an interview with The Scotsman on the day of June’s UK general election, which resulted in a humiliating setback for Prime Minister Theresa May.
Celic said at that time: “We are not seeing some great movement of jobs out of London. Any company needs to make contingency plans.
“But there are still also jobs coming into the UK. The US and Asia still have an appetite to do business here.”
However, that has been replaced by today’s stark warning after a spate of announcements by major City of London financial institutions that they are relocating some staff and operations from the UK to the EU, including Frankfurt, in the wake of the Brexit vote.
They include American giants such as Citigroup and Morgan Stanley, and Japanese majors Daiwa, Sumitomo Mitsui Financial Group (SMFG) and Nomura.
UK insurer Legal & General has said it will move some of its investment management operations to Ireland to ensure it can continue to serve its customers after Brexit, while rival Aviva, which employs 2,000 people in Scotland, is turning its Irish branches into subsidiaries.
TheCityUK is calling for a transition as close as possible to the status quo that would allow “continued mutual market access, avoid two sets of costly adaptation phases, and see the UK accept all of the rights – and obligations – of the single market”.
Celic added today that a failure to secure a transitional deal carried “a very high risk” of jobs and inward investment leaving Europe entirely, with rival financial centres such as New York and Singapore in pole position to benefit from the disruption.