By Tina Irgang
British Prime Minister Theresa May announced this week that she would initiate proceedings to exit the EU on March 29. The announcement comes as several London-based banks make plans to move thousands of jobs out of the UK.
The job losses associated with Brexit are likely to accelerate in coming months, as The Independent reports that the EU is planning special incentives for banks wanting to relocate: “Banks in London that relocate operations to the euro zone after Brexit are likely to be spared a lengthy entry test by regulators, making it easier for them to shift, according to two officials with knowledge of the matter. The European Central Bank, the euro zone’s banking supervisor, has had many inquiries from British-based banks wanting to come under its watch, prompting it to look at fast-tracking license applications.”
Of course, it’s in the EU’s best interest to make Britain’s exit both politically and economically difficult, so as to discourage other countries from pursuing a similar course. European Commission president Jean-Claude Juncker told a German newspaper that other member states “will realize it’s not worth leaving” after they see the UK’s deal, CNN reports.
Some of the EU’s thinking on the negotiations is already becoming apparent. A leaked strategy document first reported by a Dutch newspaper reveals that the EU will take Britain to the International Court of Justice if it tries to walk away without paying an estimated £50 billion ($62 billion) “divorce bill,” according to The Telegraph.
In addition, EU officials have been meeting with UK-based airlines to let them know they will need to relocate their headquarters to the European mainland, or take other steps to establish a significant presence outside the UK, if they wish to continue flying routes across the continent, The Guardian reports.
Banks are on the move
Meanwhile, international banks whose European operations are based in London are making moves to relocate at least some of their operations. Two other major financial hubs, Dublin and Frankfurt, are set to benefit most. According to The Independent, “Bank of America, Standard Chartered and Barclays are considering Ireland’s capital for their EU base to ensure continued access to the single market, said people familiar with the plans, asking not to be named because the plans aren’t public. Goldman Sachs and Citigroup are among banks eyeing Frankfurt.”
Meanwhile, Reuters reports that Goldman Sachs as well as major European banks HSBC and UBS are considering plans to move about 1,000 jobs each out of London.
But, banks aren’t the only ones looking to get out. A recent survey by consulting firm KPMG found that a third of manufacturing firms in the UK are planning to move some of their operations elsewhere. The main beneficiaries would be China and India, reports The Independent.
What’s more, other European countries are actively working to make themselves more attractive to companies spooked by Brexit. Poland, for one, has embarked on a $245 billion plan of economic reform, with the goal of attracting as many as 30,000 British jobs by the end of the year alone, Bloomberg reports.
The economic consequences of Brexit are just beginning to come into focus, but there can be little doubt that the next few years will be uncomfortable ones for companies doing business in the UK.
Tina Irgang is SmartCEO’s managing editor. Contact her at firstname.lastname@example.org.