Brexit Bulletin: What HSBC Is Seeing

The uncertainty of Brexit talks is prompting customers to find ways around London.

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HSBC, Europe’s largest bank, is spotting some interesting Brexit-related decisions already being made by its clients.

Noel Quinn, the bank’s head of global commercial banking, told Bloomberg’s Stephen Morris that some of its largest corporate clients are asking for their business to be routed through the bank’s offices in mainland Europe.

Visitors look out from Greenwich park against a backdrop of offices of global financial institutions, including Citigroup Inc., State Street Corp., Barclays Plc, HSBC Holdings Plc, and the commercial office block No. 1 Canada Square, in Canary Wharf in London, U.K., on Monday, Dec. 12, 2016. Credit Suisse Group AG is planning to sublease space in London’s Canary Wharf district after cutting staff and squeezing costs, according to two people with knowledge of the plan. Photographer: Simon Dawson/Bloomberg

The view of London's Canary Wharf, including the HSBC tower, from Greenwich Park

Photographer: Simon Dawson/Bloomberg

“A small number of our larger clients are asking us to book more of their trade and foreign-exchange activity in their French operation through our Paris office,” said Quinn. Executives at multinational companies are looking past Brexit talks, “making plans to ensure they can continue to trade irrespective of the outcome. They can’t afford to wait for a decision that may not emerge until two years’ time.”

Quinn said some clients have also boosted their holdings of cash since last June’s referendum either because of sterling’s decline, a deferment of investment or concern about the economic outlook. He also noted some companies are evaluating whether to “flip” their regional head offices to European cities from Britain, meaning they would need to reclassify the U.K. branch as a country office.

Reliant on Migrants

Britain’s manufacturing, retail and hospitality industries are potentially the most vulnerable to any restrictions on the number of economic migrants from the EU after Brexit.

The Office for National Statistics released data on Wednesday which showed the majority of foreign nationals in the U.K. workforce were from within the EU. Those from Eastern Europe, Bulgaria and Romania were likely to work more hours and earn lower wages, partly reflecting their numbers in lower-skilled jobs, the ONS said.

Fuel Shortage

Brexit is going to make it even harder for Britain to rely on natural gas to fuel its economy.

Mathew Carr and Kelly Gilblom report on Thursday how gas imports have jumped 87 percent over the past decade, leaving the country at the mercy of foreign suppliers just as leaving the EU threatens to push up import costs and trade rules for the fuel are likely to be rewritten.

“Brexit is going to complicate matters,” said Russel Mills, director of energy and climate policy at Dow Chemical.

Brexit Bullets

  • The U.K. government mustn’t let Brexit negotiations divert it from the structural challenges facing businesses, says the British Chambers of Commerce.
  • Britain is facing an “absolute catastrophe” if it does not maintain a “frictionless and seamless” border at Dover and other ports, the shipping industry warns, according to the Guardian
  • More than a quarter of British employers saw a decline in job applications from EU workers since referendum, according to jobs website Reed
  • The London housing market is suffering its deepest slump since the financial crisis, according to Royal Institution of Chartered Surveyors index
  • U.K. companies risk losing out on lucrative EU space contracts, says the Financial Times
  • 73% of Britons would like the number of international students coming to the U.K. to stay the same or increase, a ComRes poll for Universities U.K. shows
  • Tesco vowed to keep prices low even as the pound pushed up the costs of imported produce and the company remains under pressure from discounter rivals
  • EU states are unlikely to ratify a post-Brexit trade deal if U.K. seeks to recast itself as a regulation-light “Singapore-on-Thames,” according to the EU’s ambassador to the World Trade Organization.
  • EU Economics Commissioner Pierre Moscovici says no Brexit deal would be bad for both parties, but worse for the U.K.
  • Demand for Dublin office space is picking up because of Brexit, according to realtor Jones Lang LaSalle

On the Markets

Political turmoil on the other side of the English Channel may give the pound an improbable respite from its Brexit-induced weakness.

A presidential-race victory for France’s National Front leader Marine Le Pen, whose opposition to the euro is one of the hallmarks of her campaign, could throw into doubt the future of the both the currency bloc and EU, and so boost sterling’s allure, according to fund managers.

And Finally...

When Taavet Hinrikus co-founded TransferWise, an exemplar of the U.K.’s fintech scene, he chose London as its base. If he had to do it all over again, he’d go elsewhere – because of Brexit.

Hinrikus delivered that message on Wednesday at the International Fintech Conference in the U.K. capital, where Chancellor of the Exchequer Philip Hammond and Bank of England Governor Mark Carney also spoke. 

Taavet Hinrikus, co-founder and chief executive officer of TransferWise Ltd., speaks during the International Fintech Conference in London, U.K., on Wednesday, April 12, 2017. Bank of England Governor Mark Carney said the crisis shows why regulators and the banking industry must stay on top of the rapid developments in financial technology so that the system is solid enough to withstand shocks. Photographer: Simon Dawson/Bloomberg

Taavet Hinrikus, co-founder and chief executive officer of TransferWise Ltd., speaks at the International Fintech Conference in London on April 12.

Photographer: Simon Dawson/Bloomberg

“While we’re happily headquartered here in London, if I were setting up TransferWise today I would not choose London,” said Hinrikus, whose “unicorn” startup worth more than $1 billion now employs 650 people and transfers $1.2 billion in 40 currencies every month. “We have no idea what Brexit will mean for the city or for the country, and that uncertainty is damaging.”

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