Most Financial Services firms expect an extension on 31 October but nearly half are ready to move UK business outside of the EU in case of no-deal exit – EY poll
5 August 2019
- Nearly half (42%) of Financial Services firms say they will transfer UK business to a global centre outside the EU on Day 1 in a no-deal scenario, with most choosing New York/US (13%)
- 54% of firms believe a further extension is the most likely outcome on 31 October, with 34% expecting the UK to leave with no-deal and only 12% expecting to leave with a deal agreed
- When asked to choose their top 3 issues in a no-deal, 29% chose Contract continuity and jurisdictional controls followed by Market volatility (20%) and Capacity for heightened regulatory reporting (19%). Other issues were Immigration considerations for UK and EU workforce – 11% and data transfer – 11%
LONDON, 05 August 2019 - Commenting on the polling results, John Liver, Financial Services Partner at EY, comments: “Over half of Financial Services firms think an extension is the most likely outcome come 31 October 2019, but a third now believe a no deal exit is the most likely outcome – and all firms recognise they need to continue to plan on the basis of a possible no-deal exit. Many firms have now established or built up presences where needed, but there is still a lot to do to ensure they can continue to serve clients smoothly and without disruption. Activity is now ramping up again as the new deadline looms.
“A number of legal, operational and market risks around a no-deal exit continue to concern the industry. The biggest worry in a no-deal exit is around contract continuity and jurisdictional controls (29%). This reflects the fact that only in limited areas has Europe-wide action been taken to mitigate risks to contract continuity and therefore disruption to client services – firms are reliant on a patchwork of policies in individual countries, and need to understand and put in place controls to accommodate each individual country’s requirements.
“Market volatility was the next biggest issue for firms (20%), as firms recognise that they need to be prepared both to manage potential impacts of real economy difficulties that could be caused by a no-deal exit, and choppy financial markets. This is followed by concerns over capacity for heightened regulatory reporting (19%) as firms deal with ever increasing regulatory scrutiny in their existing markets as well as dealing with new regulators as they build operations abroad.
“Whilst immigration considerations feature in the list of top concerns, we were surprised this issue does not have higher profile. Many firms are relying on people having roles in both the UK and their EU27 country and potential restrictions on the type of work that business travellers can do need to be considered carefully with red lines kicking in from day 1 across most of the EU27.
“Should the UK leave the EU without an agreement, the City will be less accessible to the EU than those global centres with equivalence status with the EU. Four in ten Financial Services firms have said they will transfer business from the UK to a non-EU global centre if there is a no-deal exit, with 13% choosing New York/US, 6% Singapore and 3% Hong Kong. This is in addition to the operations and staff already moved, with EY’s latest Brexit Tracker finding around 7,000 jobs and £1 trillion of assets from Financial Services will move from the UK as a result of Brexit.”