Agreement is ‘workable’ but firms still expanding offices in Ireland and on continent

This article is more than 1 year old

This article is more than 1 year old

Banks and other financial services companies have cautiously backed progress around the Brexit deal, though firms are pushing ahead with job moves and expansion in other EU states until a formal agreement is signed.

John McFarlane, chairman of the financial services advocacy group TheCityUK, said the Brexit draft withdrawal agreement marks “constructive progress” and “presents a pragmatic and workable solution”.

“Securing an implementation period is a major step to ensuring financial stability and enables businesses to deal with Brexit in a normal rather than hurried way,” he added. “We appreciate there needed to be compromises, but this is infinitely better than the severe and unpredictable damage from a no deal outcome.”

McFarlane also serves as the chairman of Barclays, which is planning to expand its Dublin office by 150 to 200 staff that will include new hires and UK job moves. Barclays declined to comment on the impact of the Brexit withdrawal deal.

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Banks and insurers are unlikely to halt implementing their Brexit contingency plans without further clarity.

Simon Lewis, the chief executive of Association for Financial Markets in Europe (AFME), a trade body which represents European and international financial institutions, stressed that ratification was needed sooner rather than later to “ensure an orderly withdrawal process”.

The City minister, John Glen, last month backed Bank of England estimates that Britain is likely to lose about 5,000 City jobs by the time the UK leaves the EU on 29 March 2019.

Quick guide Why is London the world's leading financial hub? Show Hide Why is London the world's leading financial hub? London is seen as the world’s leader in financial services, mainly due to language, time zone and a business-friendly regulatory framework. It is the world’s biggest market for foreign exchange trading, and the second largest for fund management. London’s global prominence increased following Margaret Thatcher’s 'Big Bang' reforms in 1986, which relaxed regulations in the City. The UK’s capital received another boost when Wall Street firms had to comply with the Sarbanes-Oxley Act of 2002, passed after the collapse of Enron to strengthen corporate governance, which prompted many foreign firms to list on the London Stock Exchange instead. The English language gives London an edge over other European financial hubs such as Frankfurt and Paris. The time zone also helps, as the City's business hours overlap those of Asia, America and the Middle East. Good transport links and a vibrant culture are also commonly cited as making London attractive to foreign banks and other firms. The question is whether London can retain its crown after the UK’s planned departure from the EU on 29 March 2019.

The insurance market Lloyd’s of London officially opened its EU hub in Brussels on Wednesday, following through on contingency plans that ensure its members will be able to serve EU clients after Brexit.

The site is up and running with about 50 staff after a mix of local hires and about a dozen or so job relocations from London. A Lloyd’s spokesperson declined to comment further.

The Wall Street bank Citigroup is expected on Thursday to embark on consultations with individual staff whose jobs have been earmarked for relocation.

The US firm last month outlined plans to move 63 roles from London to EU offices, including Dublin, Frankfurt, Luxembourg and Paris. An internal memo said the moves would affect staff in its sales, trading and private banking divisions, which will need to be performed from inside the EU from March 2019, assuming there is no transition period. Citigroup declined to comment.

Citigroup is among a group of British and international banks, including HSBC, Goldman Sachs, and JP Morgan, which are set to bolster their EU workforce through new hires and staff moves from the UK to offices in Frankfurt, Paris, Luxembourg, Milan and Dublin.

Catherine McGuinness, policy chair at the City of London Corporation, was relatively optimistic, saying the framework does offer some “welcome clarity” as firms wait for the text to be finalised.

“In particular, the commitment to close regulatory and supervisory co-operation is a positive move that recognises the need for any deal to reflect the City’s unique role in providing services to households and businesses across Europe.”

Ratification of the withdrawal deal would secure a transition deal and extend cross-border access for financial services to December 2020.

“As we have said, it is vital that a transition period is secured to allow the sector time to work through this complex process and the suggested withdrawal agreement would provide that,” McGuinness said.

“Greater clarity is also needed for the European nationals who account for around a fifth of the City of London’s workforce,” she added.