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The Brexit Diary: What if we had a referendum on England winning the world cup? Brexit and the banks in 2017

12 January, 2017Peter Hahn

It’s time to think about some visible first moves that many City organisations will make in 2017 as they plan for whatever may be the result of UK EU negotiations.  Before I get to that I wanted to put into context the challenge that the entire EU/UK discussion is likely to present to businesses with EU ambitions.  

For some New Year’s fun, I’ve imagined this as if we had an ‘England Winning the World Cup’ referendum.  You might say ‘who would vote against such a referendum except a few spoil sports’ however, there are more than a few groups with some legitimate issues.  Your favourite TV show might be cancelled for the final, your local pub might be overwhelmed with irregulars, and what about the other nations of the UK? Add few more and a no vote could quickly grow.  But really, we know the majority would vote for a win.  Yet, what would that mean?  Would the men in white play to world beating level as a result? Would the other teams lose to us as a result?  Before the vote, some voters might ask these questions and say that while this appears a simple question, either result isn’t very doable.  Even a no vote might encourage more commitment.  Sadly, these types of questions weren’t raised very well before the Brexit referendum.  I’m being simplistic, but a ‘should we leave over the next decade?’ could have provided much more time for government strategy and skilling-up to negotiate and for business to adjust.

So here we are in the year following the Brexit referendum and whether for or against, it’s hard not to argue that the result of the vote seems much more complicated than anticipated.  Passporting, Equivalence, Free Trade Area, Customs Union.  Yes, it is certainly a bit more detailed than England winning – while most fans know what steps to take to improve a team such as better coaching, players, etc., can anyone know what we need do to optimise leaving such a complex arrangement as the EU?

So here we are, I may think that we were given a choice to vote for something that wasn’t very doable, others may say that we have to march ahead with the orders given and make the best of it, but if you’re an international bank the likely message is that you won’t be waiting to find out what ‘make the best of it’ means.  You first step is likely to be to relocate your European headquarters somewhere inside the continuing EU.  There’s more than a bit of licensing, regulation, accounting, and tax to go with that, too.  By the way, much of the advice around this move is likely to be gained in the new location.  And yes, that new EHQ will also need a board of directors and it would seem unlikely that the local regulator will be keen to have them all pop in from the UK for a meeting.  How easy will it be to find them?  A few banks have already announced plans, more will come.  Over the year, and particularly post our formal Article 50 notice, watch for movements of operations that may start happening.  Since the EHQ will be mostly about intangibles – not many people – it will be easier to do quickly and quietly and perhaps without much notice, but as plans for moving operations gel, visibility will increase.  For many years, the City has moved operations positions outside of London so the effects may be felt more at a further distance from the City.  From a different perspective, the recent decrease in the value of the pound versus the dollar has made the UK, and particularly London, more attractive to US technology companies which are increasing their investments in financial technology; businesses with many likely spinoffs to come in the year ahead.

Read Dr Peter Hahn's full Brexit series here: