Financial services companies have held off on big changes to their operations as they wait to hear what trading relationships might be announced after Brexit day.
According to EY Financial Services’s Brexit Tracker, which charts sentiment and movement of 222 firms in the UK financial sector in relation to Brexit, the proportion of companies stating they are considering or have confirmed relocating operations and/or staff to Europe has now stabilised at 41 per cent.
Since the 2016 referendum, 22 per cent have publicly voiced concerns that Brexit is having a negative impact on their operations, through a mix of reduced profitability, deferred merger and acquisition activity, asset outflows and a slowdown in lending
However, a more certain outlook since the December 2019 general election indicates that the industry’s largest players have largely implemented their plans to ensure they can remain operational post Brexit, and are now increasingly turning their attention to the negotiations on the future relationship with the European Union.
Of the 222 firms monitored by the Brexit Tracker, the number publicly confirming relocations of staff and operations has only risen by one since July 2019, compared to an increase of 11 in the first half of 2019.
Omar Ali, UK financial services leader at EY, said: “Our data suggests companies reached peak preparation in 2019 ahead of a potential no-deal Brexit. They have built the infrastructure they need on the continent to ensure they will be able to serve clients once Brexit happens – be that with or without a deal.
“But they are now waiting for clarity on the level of cross border access and alignment – if indeed any. Although everyone has their parachute ready, the industry is still seeking the softest landing, with a strong future trading relationship that reduces the ripple effect on the economy.”
The UK government appears to be pursuing “outcome-based” equivalence. This would provide much-needed certainty, according to Mr Ali, but it is a complex framework with over 40 provisions, which is not guaranteed long term, and means different things to different companies.
Mr Ali added: “Given the short timetable for the negotiations, it is important that government and industry work together to collectively agree priorities – financial stability and the best outcome for clients need to be front and centre of this debate.”
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