Finance

Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Davos may be cold, but it looks like a more comfortable home for bankers than London.

Prime Minister Theresa May appears dead set on torpedoing her country's key export product, financial services, with her talk of a clean break with the European Union signalling the end of Britain's membership of the single market.

Why Europe Matters to London
U.K. financial services' firms European passports show importance of outbound finance into EU
Source: Citi/FCA

But even as talk in the Alps turns to building an escape raft to Dublin, Paris or New York, there's little reason for bankers to jump ship immediately. There are still several steps to go before any Brexodus -- and being a first leaver is no advantage yet. Here's why.

Timing

The timeframe of Brexit encourages delay, not action.

Official talks on Brexit are due to be triggered by the end of March, followed by a negotiating period of as long as two years.

There's a likelihood that it will take even longer to negotiate market access arrangements and May hasn't ruled out the possibility of looking for a transitional deal to avoid a so-called "cliff edge" situation, where access to the single market would be abruptly shut down. Brussels is mindful, too, of the risk Brexit poses to financial stability, according to Michel Barnier, the EU's top Brexit negotiator.

Planning for a worst-case scenario may mean planning for that cliff -- but we're not going to hit it tomorrow. UBS Chairman Axel Weber put it bluntly: "As long as we have market access for two years, the pressure is not that high."

Location

CEOs of big international financial firms have long been clear that they already have options to relocate their business in Europe -- largely to their other subsidiaries in the region. They said this again on Tuesday.

Ireland is home to subsidiaries of Citigroup and Barclays; HSBC has a base in France. More subsidiaries may have to be opened depending on the outcome of Brexit.

But why rush when it comes to investing in the euro zone? This is an election year for France, Germany and the Netherlands at a time of populist upsets at the polls. Francois Hollande can promise to make Paris more competitive for business -- but his successor may not carry through on that pledge.

Political negotiations are tough -- but so should investment decisions be.

Cost

Relocating people is neither easy nor cheap. HSBC Chairman Douglas Flint described it as "clunky and expensive."

Estimates from consulting firm Synechron suggest a bill of about $65,660 per employee. That doesn't include the cost of carving out businesses and hiving off precious capital.

This isn’t a time of bumper profits for global banking, an industry that is only just about covering its cost of equity.

You don't have to be naive or dismissive, therefore, to believe that big banks' moving plans will be as late as possible and as minimal as possible.

Best of Brexit
European investment bank shares have rebounded from the Brexit vote
Source: Bloomberg

Shareholder pressure relating to banks' Brexit plans has been frankly minimal so far. The worst-hit stocks have been those exposed to London's deflating housing bubble or those exposed to a potential reversal of the U.K.'s economic fortunes.

May's tough talk doesn't mean bankers need to walk the walk just yet.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net