A Brexit committee for financial services has heard that two years is too short for the industry to adapt to the UK’s exit from the European Union.
Executives from Allianz Global Investors, HSBC and Bank of America Merrill Lynch appeared in the House of Lords today to explain how UK’s negotiations from the EU would impact the industry.
Under Article 50, the country that is seeking to leave the EU has two years to do so unless every remaining member state agrees to an extension.
But the Brexit committee heard from HSBC chairman Douglas Flint that the group would struggle to move activities domestically within the two-year time frame.
“It’s taken us three years to move 1,000 workers to Birmingham. The prospect of moving any number of people outside your home country and setting up arrangements and getting licensced is a non-trivial task,” Flint told the committee.
Flint says businesses need to know where is the government aiming to get to in terms of its fresh relationship with Europe and the arrangement for the interim arrangement between the end of negotiations and the conclusion of the exit.
Bank of America Merrill Lynch president for EMEA Alex Wilmot-Sitwell says moving businesses between jurisdictions is a “huge” amount of work.
“The bridge to the ultimate destination is absolutely vital because if that bridge isn’t long enough or indeed isn’t even built in time then it’s impossible to make that journey without incurring huge risks and harm to participants.”
Wilmot-Sitwell compared financial services to nuclear waste because they are so risky.
“You don’t move nuclear waste in a race, you move them in a carefully, coordinated way so the materials are perfectly safe so long as they’re properly handled.”
Vice chair for Allianz Global Investors Elizabeth Corley told the committee developing a trade deal for services is “substantially underdeveloped” internationally, particularly for financial services.
“The challenge is that there is a clean sheet of paper and how would one develop a services negotiation,” Corley says.
She adds that European retail investors have benefited from be able to buy from the best supplier in the market through Ucits regulation and there would be questions about how that is impacted by Brexit negotiations.
“Europe has been one of the innovators in creating a single market for retail asset management and that’s a very rare phenomenon in the world and that’s the Ucits directive.”