Brexit Could Harm Your Biggest Companies, U.K. Bankers Warn EUby
European firms need access to London, BBA’s Browne says
Broader costs need to be understood, PwC’s Gray says
Britain’s financial industry has a message for Europe: cutting out the City of London won’t just hurt U.K. banks, it’ll harm companies from Germany to France as well.
European companies could lose access to the region’s biggest financial hub, making it harder for them to borrow money or buy derivatives to protect against currency swings and fluctuating interest rates, British Bankers’ Association Chief Executive Officer Anthony Browne told a U.K. parliamentary committee on Wednesday. That’s an added incentive to strike a deal on Brexit that’s good for Britain as well as the remaining 27 European Union member states, he added.
The world’s biggest banks are piling more pressure on U.K. Prime Minister Theresa May and other European leaders to strike an interim agreement that limits damage to their operations and the region’s economy. With reluctance in Britain to allow concessions on immigration and as Angela Merkel and Francois Hollande face elections next year, politics could stand in the way.
“We shouldn’t look at all this about what’s in our own national interest; it’s got to be in their interest as well,” Browne told the House of Lords’s committee on financial affairs. “It’s in the interest of a lot of customers across Europe to be able to continue to have access to the services that London offers. It’s not in the interest of either side to sever that.”
The lobbying position signals a shift from warnings from some banks leading up to the June 23 referendum that they would move operations from London in the event of a Brexit. It also mirrors the arguments made by campaigners for Brexit, who said EU nations wouldn’t want to lose access to one of their biggest export markets by cutting the U.K. out of its free-trade area.
Also speaking on the panel, Andrew Gray, U.K. regional financial services leader at PricewaterhouseCoopers LLP, said that some of the wider costs that would impact the U.K. and Europe “should be more fully understood” before negotiating positions get too hard. “The failure of an investment bank to provide a German corporate with the right financial structuring would inevitably be a direct cost on the German corporate, as well as a loss of revenue for the English subsidiary of the particular institution.”
Separately, TheCityUK, another lobby group, said in a briefing paper that securing ongoing access to the EU single market on broadly similar terms to now is vital to maintaining a vibrant U.K. financial-services industry. It’s calling on the U.K. government to strike an interim agreement with the EU on preserving so-called passporting rights for a transitional period after the end of two years of official Brexit negotiations.
While European lenders such as Deutsche Bank AG have operations elsewhere in the EU outside of London, they’re not immune from Brexit, CEO John Cryan said last month. He said the U.K. capital will remain a top financial center over the next decade and his bank realizes that many of its customers and trading operations are based there.
Sign up to receive the Brexit Bulletin, a daily briefing on the biggest news related to Britain's departure from the EU.