Cass academics comment on Article 50
The UK will begin the long, slow process of leaving the European Union tomorrow. Leading academics from Cass Business School consider the implications for banking, business and finance.
“As the UK government triggers Article 50 tomorrow, bankers are making plans of their own, which include leaving London. Several City executives have confirmed contingency plans to move staff to the EU in view of the possible loss of passporting rights. Banks that have recently announced plans to move from London include JPMorgan, HSBC, UBS and Goldman Sachs. Even the UK based Lloyds Banking Group has considered Frankfurt as its base for maintaining ties to the EU.
“A number of non-EU financial services firms have significant offices in London; contingency plans might require them to set up subsidiaries in EU countries. This, however, is dependent on the type of business carried out with EU clients and whether a restructuring of the organistation would prove optimal in the long run. The decision to leave the EU will lead firms to reassess their investment choices.
"EU regulators are equally busy drafting plans: one of their key objectives is to prevent banks’ organisational choices post Brexit leading to regulatory arbitrage.
“The initial evidence suggests that the impact of Brexit will be substantial, although it is early days and the negotiations have yet to begin. If there are any benefits to be had for the UK economy, these will take years to materialise. The workload to disentangle from the EU and chart a new course is enormous.”
“With the triggering of Article 50, the easy part is ending and the hard part is now starting – after the Theresa May’s cabinet realised that after all you cannot have your cake and eat it as promised during the Brexit campaign, the fight is on over what little cake is left for the UK.
“What does this imply for banking and finance? There are two major trends – one is for financial institutions finding a home for the EU operations with different financial centres competing with each other and new champions crowned every month – yesterday it was Dublin, today it is Frankfurt, tomorrow maybe Amsterdam.
“Most analysts agree that there will not be one financial centre replacing London in the short- to medium-term and London will continue to function as global financial centre, though most likely on a smaller scale. The second trend is a race against the time for the UK government in defining the status of London with respect to EU regulation and access. The longer the uncertainty, the stronger the exodus. The levers in this negotiations are more on the European and the British side, as are the incentives to delay this process as long as possible.
“What does the Article 50 trigger imply for the EU? It is another milestone in the long-running European crisis and another wake-up call for the renewal of the European Union, as discussed in this eBook, with contributions from both political scientists and economists: New eBook: Quo vadis? Identity, Policy and Future of the European Union. On an upside, EU member governments seem to have realized the need for renewal; it is critical that this renewal comes from the nation states and is not another Brussels project.”