Nearly three-quarters of British bankers think London will remain the financial centre of Europe in five years’ time, according to a study by Synechron.
The financial services consulting and technology services provider conducted the study into the short- and long-term impacts of Brexit in partnership with The TABB Group.
One of the major findings of the research was 72 per cent of British bankers said they believed London would still be the financial centre of Europe in five years’ time.
This might suggest that despite the current drop in the value of the pound and the pain that some companies are experiencing, many believe the implications won’t be as significant in the long-term. However, with the British Bankers’ Association saying recently that large and small banks were considering their options outside of the UK, it is clear that some are not willing to wait and see what deal the UK government agrees with the European Union.
“Banks are no longer waiting for the Government to trigger Article 50 and have begun setting up Steering Committees to plan for life outside the European Union, with some already considering relocating staff to other cities around Europe. 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,” said Tim Cuddeford, Managing Director at Synechron Business Consulting.
Given this uncertainty, the research also found that 55 per cent of British banks have set up ‘Brexit Steering Committees’ to prepare for life outside the EU. A popular topic for these committees is likely to be relocation from the UK to another European financial centre, which Synechron has calculated to cost an average of £50,000 per employee.
The study also found 56 per cent of senior British capital markets executives believe that compliance costs will increase following Britain’s decision to leave the European Union (EU), with not one executive expecting regulatory costs to decrease. This contrasts a popular view that ‘Brexit’ would reduce red-tape for financial institutions.
While 78 per cent of executives believe that Brexit will have a negative impact on UK financial markets, perhaps more interestingly, the survey showed that 82 per cent also believe the EU will be negatively affected. This could, in part, be because 51 per cent of executives believe that Britain is in a position to negotiate a bespoke trading relationship with the EU that is tailored to the interests of the UK.
While that new relationship with the EU remains to be shaped, the survey indicates mixed views on how to proceed. About 19 per cent of respondents believe that the UK should pursue the ‘Norway option’ and negotiate to remain part of the European Economic Area, whilst 18 per cent believe the UK should follow the ‘Swiss model’ and negotiate bilateral treaties.
Synechron conducted the survey of 80 financial services executives working in capital markets in banks based in the UK.