Banks accelerate contingency plans as Brexit gets real


The next day, staff accelerated contingency planning for the bank’s London investment banking unit and began to contact other European cities, according to a person familiar with the matter. While Daiwa doesn’t have a definite plan yet, it could involve relocating some operations to the Continent, and recent events are adding to the pressure.

For the UK’s financial sector, Brexit is getting real. By the end of March negotiations are due to start, and British-based banks are scrambling to finesse plans for life after the European Union.

So far pleading from banks to retain access to the EU has proved a tough sell, bank executives and their advisers say. Access to Prime Minister Theresa May “has been pretty much zero”, says one person advising several lenders on their Brexit plans.

Some executives expressed dismay that May recently visited New York to talk to Wall Street executives but hadn’t yet met some British lenders. On October 6, Chancellor of the Exchequer Philip Hammond also travelled to New York with the intention of reassuring banks he will try to negotiate good access to the EU.

Nevertheless, the prospect of a “hard” Brexit, in which the UK cuts trade links with the bloc in return for control over its borders, looms over the sector. “It looks increasingly not ‘if’ but ‘when’ banks are going to have to trigger contingency plans,” says Stephen Adams, a partner at consultancy Global Counsel.

Many banks are already working on the basis that the financial services industry is going to get a rough ride. Morgan Stanley, for instance, is crafting plans on the basis of a worst-case scenario of a breakaway from the EU, according to a person familiar with the plan.

Even British-focused banks are getting sucked in. Executives at UK retail bank Lloyds Banking Group are considering ways to create a subsidiary in Europe, mainly to access payment systems there and be able to write business in the continent, according to a person familiar with the matter.

Banks fear two things from Brexit: not being able to seamlessly sell their services across the EU and the impact of potential UK immigration restrictions on their international workforces. Details on the government’s position on both topics remain vague.

The Brexit negotiations are expected to last two years. Ideally banks then want a treaty to be struck between the EU and the UK that allows them to continue to sell products across the continent in return for adhering to similar regulations. Also on the wish list: a long transition period to allow companies several years to adjust their business models to any changes.

A vast financial lobbying machine has creaked into action, with trade groups churning out research papers on the impact of Brexit on the finance industry and the British economy. On October 5, The CityUK, a business group, warned that up to 75,000 jobs could go if the UK fails to negotiate access to the EU. If the status quo is broadly maintained this could be as low as 3,000, the research says.

But politicians are wary of being seen pandering to the scandal-scarred finance industry, analysts say.

Tactics for pulling on political heartstrings vary. Some lobby groups want to stress London’s role facilitating funding for small and medium-sized businesses across the EU. Others want to emphasise the impact of a “hard” Brexit on financial stability.

Dealing with the government’s desire to curb immigration is also forcing some lobbyists to unusual lengths. The City of London Corporation is pushing a plan to soften the impact of any immigration quotas on the British capital. A “London Visa ” would help EU citizens find jobs in the city, but not outside it, officials say. It is unclear where London would technically extend to or how this would be policed.

Meanwhile, for lenders the clock is ticking. The day the Brexit negotiations begin, banks have to decide on whether to press the button on their contingency plans, says Simon Gleeson a partner at law firm Clifford Chance. Shifting operations abroad could take years. “And the last man out of the door looks like a loser,” he says.

Write to Max Colchester at

This article was published by The Wall Street Journal

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