The latest twists continue in the Brexit saga. The UK’s House of Commons has voted overwhelmingly to prevent a no deal Brexit under any circumstances. Yet as the dust settled, it was evident that while the message from British MPs was loud and clear, the vote itself was not legally binding.
Further intervention was made the next evening, when MPs vote on whether to extend Article 50 to give more time for an orderly Brexit to be achieved – the UK could still be leaving the EU on March 29 without a deal. They decided to. But even now we have no idea whether the extension will be until June 30, a much longer extension, or none at all and we still go out on March 29. Largely because it is down to the EU to decide on the time frame.
It is little wonder businesses do not know what to do because, as it stands, it seems the leaders of the UK cannot decide what to do either. Since the original referendum vote on June 23, 2016 – which incidentally was also not legally binding yet appears to provide a ‘clear mandate’ for Brexit if you listen to the Prime Minister – the country, and businesses in particular, have been left directionless.
After suffering for too long with uncertainty, the major financial firms in London have had enough. Many have started to make their own moves to protect themselves from the Brexit upheaval, and as a result, London has already lost thousands of staff and billions of pounds to key financial centres in Europe. Competitor financial centres in Europe, let’s not forget.
JP Morgan Chase, Bank of America and UBS Group have all moved their HQs out of London. Barclays has shifted its European HQ to Dublin, which has been one of the biggest beneficiaries of the Brexit uncertainty, at least in terms of in-flowing business revenues. This is the tip of the iceberg.
Barclays alone has moved €190 billion to Dublin, and in late January when the move was approved by the UK courts, the bank said: “Barclays will use our existing licensed EU-based bank subsidiary to continue to serve our clients within the EU beyond 29 March 2019 regardless of the outcome of Brexit. Our preparations are well advanced, and we expect to be fully operational by 29 March 2019.”
The biggest problem for financial firms in London is the lack of access to EU markets after Brexit, without Government intervention. Despite the financial services industry accounting for around 6.5% of the UK’s GDP in 2017, and adding £119 billion to the UK economy, little attention has so far been paid to this ongoing ‘passporting’ ability post-Brexit.
Despite its ideal global time zone, cultural benefits and renowned capabilities for everything from custody to accessing large amounts of investment capital, London’s inability to provide access to sell products in the EU would be a major blow.
So much so that Z/Yen, which produces a global rank of the key financial centres – the Global Financial Centres Index (GFCI) – has downgraded London to second place behind New York. Demotion of the capital on the world stage was not likely to be what Brexiteers had in mind.
But the fallout from such moves do not just affect the big banks. Smaller businesses that rely heavily on the banking and other financial services staff for the success of their businesses are affected too. Restaurants have been having a hard time for a number of years, but booking site Quandoo found that the pick-up usually seen in London restaurants in February was considerably lower this year. February was just 6% ahead of January, rather than the 24% seen last year. European cities in contrast were doing far better. Milan and Berlin saw increases of 31% and 20% respectively, according to a report in the Evening Standard.
It seems everyone here is holding back, waiting to see what happens with Brexit before they start spending their hard-earned cash.
The big question is, how do Britons feel about all of this? Anecdotally it is hard to tell because of the polemic nature of Brexit. The only time we will really know is if we have a General Election, or end up with a Second Referendum. Neither is currently on the cards. But as we have seen already from the Brexit process, anything – or nothing at all - could happen.