Asset management firms expect to have their post-Brexit contingency plans in place by the first quarter of next year, despite fears of no deal between the UK and the European Union, a Member of the European Parliament has claimed.
The UK Government has been urged to come up with a transition arrangement before the end of the year in order to safeguard the position of financial services firms that have started to shift their attention to Europe.
In an exclusive speech at the European Parliament in Brussels attended by Money Marketing, Conservative MEP for Wales Kay Swinburne said firms have told MEPs their plans to move capital and staff across Europe will be finalised in the first quarter of 2018.
Swinburne said: “The biggest danger for firms is that we’re going into 2018 with no agreement on a transition arrangement, unless we have certainty on a longer period in which to work this out.”
Companies in the UK have said they must have ‘no deal’ contingency plans in place, said the MEP.
She added: “In fairness, when you have a large global player making a contingency plan, they don’t go back on it. Once they make a commitment it’s done. My colleagues here underestimate that the value of a transitioning package actually diminishes exponentially as we get closer to Brexit. The first quarter of next year is when most of the companies are telling me they’ll make some final decisions at their board.”
She added firms will move on with their plans despite the lack of clarity.
“Both the UK and the EU have realised we can’t achieve [an agreement] between now and March 2019. My colleagues here talk about transitioning but their comment is: where are you transitioning to?”
Since the EU referendum, a number of City firms have already expressed their will to move parts of their activities to Europe, especially in their client-facing business. The MEP said those asset managers that have grown their local presence in Europe through the years will continue to increase the number of activities on the continent
Swinburne said apart from Brexit pressures, moving some activities to Europe is “a good business decision” they are making as a result of their growth.
But while she recognises Brexit has been “a catalyst” for many companies to look at their strategies, she raises concerns about what local limitations might mean for some of them.
Swinburne said: “What concerns me is when firms decide, for example, in the corporate banking sector, the portion of activity to raise in the EU and if banks have to move a significant number of individuals to Europe and capital in order to satisfy the local requirement of capital that becomes a problem.”