RBS says Bri­tish gov­ern­ment start­ing to worry about post-Brexit Lon­don

Muscat Daily - - BUSINESS -

Lon­don, UK - Royal Bank of Scot­land Group Plc (RBS) chair­man Howard Davies said banks’ dire warn­ings about Brexit are fi­nally get­ting through to the Bri­tish gov­ern­ment.

“In re­cent weeks we have seen a much greater re­al­i­sa­tion of the much greater dis­rup­tive im­pact of a dis­or­derly Brexit,” Davies said on Fri­day. “The fact that the Bank of Eng­land has asked peo­ple to share their con­tin­gency plans means politi­cians are now see­ing there are po­ten­tially quite se­ri­ous con­se­quences for Lon­don, which could hap­pen in a rapid and un­planned way if we don’t get some tran­si­tion ar­range­ments.”

Since Prime Min­is­ter Theresa May lost her ma­jor­ity in June, Chan­cel­lor of the Ex­che­quer Philip Ham­mond has led a shift among May’s Cabi­net to a view that a po­ten­tially lengthy tran­si­tion pe­riod to leave the Euro­pean Union (EU) is cru­cial. While Cabi­net min­is­ters have some­times openly con­tra­dicted each other, Trade Sec­re­tary Liam Fox and En­vi­ron­ment Sec­re­tary Michael Gove, who both cam­paigned for Brexit, have en­dorsed a stop­gap.

“We are mod­estly en­cour­aged peo­ple are start­ing to un­der­stand what the stakes are,” Davies said at a press con­fer­ence to mark the bank’s sec­ond-quar­ter re­sults. “The gov­ern­ment’s more re­cent rhetoric about the need for a fairly lengthy tran­si­tion pe­riod strikes us as be­ing more re­al­is­tic. I think we are in a bet­ter po­si­tion now than we were even three months ago.”

Cabi­net min­is­ters’ rhetoric has shifted as de­tails of global in­vest­ment banks’ worst-case con­tin­gency plans have started to emerge in re­cent weeks, af­ter prod­ding by Bank of Eng­land gover­nor Mark Car­ney. Be­fore los­ing her ma­jor­ity, May was per­ceived as seek­ing a harder Brexit where EU mar­ket ac­cess for Lon­don bankers would take a back seat to curb­ing im­mi­gra­tion.

Since then, Ham­mond and Home Sec­re­tary Am­ber Rudd have laid out a vi­sion for a tran- sition pe­riod al­low­ing free move­ment of EU na­tion­als to Bri­tain to con­tinue for up to three years af­ter Brexit, though Fox has said that would ‘not keep faith’ with last year’s vote to leave. Ham­mond has sug­gested a three or four year phase-in for what­ever emerges as the post-Brexit regime, while other min­is­ters want a shorter time­frame.

The BOE last month asked banks for out­lines of what they would do if the UK is cut off from the EU’s sin­gle mar­ket. Deutsche Bank AG is pre­par­ing to shift half of its 8,000 Lon­don em­ploy­ees and as much as € 300bn of as­sets out of the coun­try. HSBC Hold­ings Plc is plan­ning to move about 1,000 roles at the cost of US$300mn, while Wall Street gi­ant JPMor­gan Chase & Co has said 500 to 1,000 jobs may ini­tially be re­lo­cated.

RBS has noted a re­cent de­cline in de­mand for lend­ing, es­pe­cially in the man­u­fac­tur­ing sec­tor, as com­pa­nies de­lay in­vest­ment de­ci­sions while the out­come of Brexit ne­go­ti­a­tions re­main up in the air. “Peo­ple are be­com­ing more hes­i­tant, and that is Brexit-re­lated,” Davies said. “Peo­ple are sit­ting on their hands a bit, think­ing be­fore they put a sig­nif­i­cant in­vest­ment in place, they want to see what the UK’s mar­ket ac­cess is.”

Across the in­dus­try, the Bruegel think tank has said Lon­don could lose 10,000 bank­ing jobs and 20,000 roles in fi­nan­cial ser­vices as clients move € 1.8tn of as­sets out of the UK af­ter Brexit. Other es­ti­mates have ranged from more than 200,000 jobs to as few as 4,000.

Howard Davies

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