- Nearly 60% expect increased compliance costs and red tape because of Brexit
- Over half of banks are establishing Brexit steering committees to assess response
- Synechron has previously estimated that it would cost an average of £50,000 per employee to relocate staff from London to another European financial centre
Synechron Inc., a global financial services consulting and technology services provider, has today released findings from its research into short- and long-term impacts of Brexit, conducted in partnership with The TABB Group. One of the major findings of the research conducted in September was that 72% of British bankers said they believed London would still be the financial centre of Europe in five years’ time.
This might suggest that despite the current drop in the value of the pound and the pain that some companies are experiencing, many believe the implications won’t be as significant in the long-term. However, with the British Bankers Association saying recently that large and small banks are considering their options outside of the UK, it is clear that some are not willing to wait and see what deal the UK government agrees with the European Union.
Tim Cuddeford, Managing Director at Synechron Business Consulting said: “Banks are no longer waiting for the Government to trigger Article 50 and have begun setting up Steering Committees to plan for life outside the European Union, with some already considering relocating staff to other cities around Europe. Whilst Brexit poses an unforeseen challenge for financial institutions, the prospect of rising compliance and huge relocation costs appear inevitable. Despite this uncertainty, we’ve found that the majority of British bankers believe that London will remain the financial centre of Europe, painting a very hopeful picture of the future.”
Given this uncertainty, the research also found that 55% of British banks have set up ‘Brexit Steering Committees’ to prepare for life outside the EU. A popular topic for these committees is likely to be relocation from the UK to another European financial centre, which Synechron has calculated to cost an average of £50,000 per employee.
Synechron’s research also found 56% of senior British capital markets executives believe that compliance costs will increase following Britain’s decision to leave the European Union (EU), with not one executive expecting regulatory costs to decrease. This contrasts a popular view that ‘Brexit’ would reduce red-tape for financial institutions.
While 78% of executives believe that Brexit will have a negative impact on UK financial markets, perhaps more interestingly, the survey showed that 82% also believe the EU will be negatively affected. This could, in part, be because 51% of executives believe that Britain is in a position to negotiate a bespoke trading relationship with the EU that is tailored to the interests of the UK.
Joost Loves, Managing Director, Synechron Business Consulting based out of Amsterdam said: “While the U.K. focuses on the impact of Brexit on London, undoubtedly, Brexit will also have a rippling impact on continental Europe as well. Businesses are evaluating their global footprint in other key markets like Frankfurt, Amsterdam, Paris and others, and the workforce composition in these cities are likely to change. Whether London pursues the Norway option or the Swiss model will be a nod to what regime the financial center views as a better model. And, perhaps most importantly, the rift between the U.K. and continental Europe is likely to widen.”
While that new relationship with the EU remains to be shaped, the survey indicates mixed views on how to proceed. 19% of respondents believe that the UK should pursue the ‘Norway option’ and negotiate to remain part of the European Economic Area, whilst 18% believe the UK should follow the ‘Swiss model’ and negotiate bilateral treaties.
- 72% of British bankers believe London will still be the financial centre of Europe in five years’ time
- 55% of British banks have set up ‘Brexit Steering Committees’ to prepare for life outside the European Union
- 56% of senior British capital markets executives believe that compliance costs will increase following Britain’s decision to leave the European Union
- 78% of executives agree that Brexit will have a negative impact on UK financial markets
- 82% also believe the European Union will be negatively affected by Brexit
- 51% of executives believe that Britain is in position to negotiate a bespoke trading relationship with the European Union that is tailored to the interests of the UK
- 19% of respondents believe that the UK should pursue the ‘Norway option’ while 18% believe the UK should follow the ‘Swiss model’
Synechron conducted a survey of 80 financial services executives working in capital markets in banks based in the UK.