Before the referendum, many large banking institutions in the UK predicted that if our vote was to leave the EU, a lot of big businesses would look to leave the UK too.
As yet, these predictions have not materialised, but we cannot forget that we have not yet left the EU. Instead, the financial industry is looking at ways in which to make themselves ‘Brexit-proof’.
Just this year, one of the UK’s largest insurance companies – Lloyd’s of London – announced the opening of their Brussels subsidiary. Lloyd’s wants to continue their services across the EU, and having offices in cities such as Brussels would allow them to do so. Current EU regulations allow institutions of their member states to trade freely across the whole of the EU, but Brexit will put a stop to this, so organisations are forced to mitigate the risk involved, and look at alternative solutions.
We’re beginning to see more and more large corporations such as this (AIG, Barclays, JP Morgan and Royal London Mutual Insurance Society are further examples), move some of their focus and operations away from the UK, and into other major cities in alternative EU member states. Many investment banks are in the same boat, waiting for Brexit to materialise, but planning for new office openings in the likes of Paris, Luxembourg, Frankfurt and Dublin. Maybe the prediction that a mass movement of bankers (tens of thousands) out of London will come true…?
It’s not just the banks and insurers who will be affected, but the regulatory bodies themselves. Both the European Banking Authority and the European Commission are likely to have to establish their operations in new cities, and before Brexit is finalised.
So will London lose its status as one of the world’s largest financial hubs? Unlikely. But things will definitely change. London (and the UK as a whole) will be forced to look further afield, outside of the EU, with some jobs being at risk, and others created with more opportunities. This is not a one-way relationship though. EU corporations will still want to do business with UK financial firms, so even post-Brexit, the field will not radically change in this regard.
And let’s be honest, the EU’s cultural centre has predominantly operated out of Western Europe, but with the UK leaving, and the emergence of formerly Soviet-dominated and Balkan states, a lot of this focus may shift further East.
This could have a huge impact on future decisions for financial firms, so it will be necessary for organisations to anticipate this, and plan accordingly.
So where should financial firms be looking to go? Cosmopolitan cities such as Brussels cannot be overlooked, as they’re teeming with skilled workers, all with multilingual capabilities.
It is these workers who will be able to help financial institutions adapt to their new environment and to fully understand the local nuances of working out of somewhere new.
The fact that many financial institutions may shift their position, and operate out of other areas of the EU, presents great opportunities within the localisation industry. Whilst the European culture is fairly homogenous, there are still apparent cultural, legal and political differences between all countries. For foreign businesses wanting access to the single market, regulations will get tougher, requiring a much more expensive and detailed process.
With all of the upheaval though, we’ll certainly see new opportunities arise. Financial institutions will no doubt wish to work with diverse markets from all around the world, and this will require an understanding of local regulations, cultural sensitivities and of course, the language. This may see changes to the recruitment process, with more local hires coming through rather than relocating existing staff, due to the imminently-planned and stricter immigration laws.
In reality, who knows what the future holds? The whole Brexit process is taking much longer than expected, and we still have no firm ideas on what the journey will look like.
But financial institutions should take the bull by the horns, and plan for the undeniable changes. What we do know is that we won’t get as good a deal as the EU member states, so planning to operate out of these included jurisdictions can only be a good thing.