Synechron and TABB Group

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Economic slowdown "less dramatic than feared"

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Almost three quarters of UK bank executives expect London will still be Europe's main financial hub in five years' time despite post-Brexit contingency plans being drawn up by many to relocate staff elsewhere in Europe, according to a new survey.Conducted by two consultancies – Synechron and TABB Group ­– the survey found that 72 per cent of the 80 capital market executives questioned believed that London would retain its No 1 position despite the vote to leave the EU.However, it also found that 55 per cent had established 'Brexit steering committees' to prepare for life outside the EU, including the possibility of relocating offices if the UK loses the passporting rights that enable financial institutions to trade freely throughout the continent.And while 78 per cent said they believed that Brexit would have a negative effect on UK financial markets, even more (82 per cent) felt the EU would face a negative impact.Tim Cuddeford, managing director of Synechron, said, "Whilst Brexit poses an unforeseen challenge for financial institutions, the prospect of rising compliance and huge relocation costs appear inevitable."Despite this uncertainty, we've found that the majority of British bankers believe that London will remain the financial centre of Europe, painting a very hopeful picture of the future."Mr Cuddeford pointed out that consideration of relocation costs was also weighing heavily on companies, with previous research by Synechron showing it would cost an average of £50,000 per employee to move staff from London to another financial centre in Europe.Meanwhile, a report from the think-tank, the National Institute of Economic and Social Research (NIESR) , said the predicted economic slowdown as a result of Brexit slowdown would be less dramatic than first feared.However, NIESR, which upgraded its forecast for GDP growth this year to two per cent and to 1.7 per cent for 2017, said households would suffer as a result of rise in inflation close to four per cent by the end of next year.It said the move to trigger Article 50 could hit growth further in 2017 and predicted the plunging pound would send inflation shooting up to about 4% in late 2017, which would affect consumer-spending power.But it said this was likely to be "only a temporary phenomenon", with inflation set to return to the Bank's 2% target in 2020.Simon Kirby, head of macroeconomic modelling and forecasting at NIESR, said, "The positive out-turns for GDP growth in the near term are very welcome but these give little to no guidance as to what will be the long-run impact from leaving the EU."The depreciation of sterling has been the most striking feature of the post-referendum economic landscape. This will pass through into consumer prices over the coming months and quarters."In contrast to the NIESR prediction, the latest forecast from the Confederation of British Industry (CBI) said UK growth would slow sharply next year as businesses and consumers curbed spending.The CBI cut its forecast for growth in 2017 from two per cent to 1.3 per cent as it repeated its call for the government to adopt an "ambitious domestic agenda" on infrastructure projects and on encouraging investment through innovation, to boost business confidence."Certainty and stability, vital ingredients that allow businesses to invest and create jobs across the UK, have been absent since the vote to leave the EU," said the CBI. "Now, with the economic outlook tempered, business leaders will be looking to the Chancellor to incentivise investment and instil confidence when he delivers his Autumn Statement (in November)."

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