A thousand EU financial firms plan to open UK offices after Brexit
More than a thousand banks, asset managers, payments companies and insurers in the European Union plan to open offices in post-Brexit Britain so they can continue serving UK clients, according to the regulatory consultancy, Bovill in a statement issued on Monday.
More than 1,400 EU-based firms have applied for permission to operate in the UK after Brexit, with over 1,000 of these planning to establish their first UK office, according to a Freedom of Information request (FOI) by Bovill. The FOI provides evidence that London and the UK will continue to be a leading player on the global financial stage after Brexit.
The FOI revealed that by October 2019, the FCA had received a total of 1,441 applications from firms to use the Temporary Permission Regime (TPR). When the current passporting system becomes defunct, the TPR will allow European Economic Area firms and funds to continue to operate in the UK, whilst they seek full authorisation from UK regulators.
The FOI also found that 83% of passporting firms that applied under the TPR currently operate under a ‘service’ passport, which means they do not currently have an office in the UK. This suggests that over 1,000 firms intend to set up an office in the UK for the first time after Brexit.
The FOI also shared the breakdown of firm type for those that have applied for the TPR. This includes more than 100 banks, which will either be setting up offices in London for the first time or boosting their current UK presence. Firms planning to move to the UK span all sectors in financial services including asset managers, insurers, exchanges and fintech firms.
The new offices and staff will help mitigate the loss of business going the other way as the current unfettered two-way direct access between Britain and the EU ends in December following a Brexit transition period.
As a first step, the companies, who until now have been able to serve UK customers directly from their home base, have applied for temporary permission to operate in Britain after 31 January when the UK leaves the bloc, Bovill notes, using figures obtained from the UK’s Financial Conduct Authority (FCA).
“These figures clearly show that many firms see the UK as Europe’s premier financial services hub,” says Michael Johnson, a consultant at Bovill.
More than 300 financial firms in Britain have opened EU hubs to continue serving clients in the bloc after Brexit, according to a recent survey from New Financial think tank.
EY consultants state that large UK-based firms had now implemented plans enabling them to continue operating in the EU after Brexit, according to Reuters. It maintained its estimate that around 7,000 positions would be relocated from London to the continent and a further 2,400 jobs created and hired for locally at the new EU hubs.
Firms are now carefully watching negotiations on Britain’s future relationship with the EU, according to EY.
The statement comes amidst JP Morgan Chase opening up a second building in Paris that can house up to 450 employees, as it steps up the shift of its euro-related trading operations out of London due to Brexit, as reported by the Financial Times.
The US’s largest bank by assets tells the FT that the move was part of its “strategy to continue to serve European-based clients seamlessly from major cities across the continent including Frankfurt, Luxembourg and Dublin”.
JP Morgan will initially transfer salespeople, followed by an as-yet undetermined number of traders, depending on the timing and substance of the UK’s departure from the EU, according to Kyril Courboin, the bank’s head of France.
“London will still be number one” and would continue to be the regional hub for trading activities not denominated in euros, says Courboin. JP Morgan has about 10,000 people based in London and 260 employees in Paris, with the new building in the French capital creating capacity for an extra 450. It also has roughly 500 people in Frankfurt and 450 in Luxembourg.
Britain’s finance minister Sajid Javid told the FT on 18 January that future EU access would be under the bloc’s “equivalence” system, a patchy and basic form of access used by the United States, Singapore and Japan.
“For many, equivalence would provide much-needed certainty, but it is a complex framework with over 40 provisions, which is not guaranteed long term, and means different things to different firms,” says Omar Ali, EY’s UK financial services leader.
Bovill notes that 228 firms from Ireland had applied for temporary permission to keep serving UK clients until they obtain full authorisation for a new UK hub.
“In practical terms, these figures mean that European firms will be buying office space, hiring staff and engaging legal and professional advisers in the UK,” notes Bovill in its statement.
According to the regulatory consultancy, firms from France, Cyprus and Germany have applied for 170, 165 and 149 temporary permissions respectively.
EY notes that banks will now have to decide whether having multiple hubs in the euro zone and Britain after Brexit makes economic and strategic sense or if some should be closed.