LONDON — Some of the City’s most prominent executives have called for a three-year transition period once Britain officially leaves the European Union, warnings that thousands of jobs could be at risk if such an arrangement is not put in place.
HSBC chairman Douglas Flint and London Stock Exchange CEO Xavier Rolet both told MPs on Tuesday that they needed a transition deal when giving evidence to the Treasury Select Committee in Parliament.
A transition deal would prevent a cliff edge at the end of the two-year Brexit negotiating period that begins once Article 50 is triggered. Experts fear that if a trading agreement is not put in place by the end of that period, which is likely, then finance, legal, and other services firms will be unable to do business with the EU.
If no transition deal is put in place, banks and financial firms may begin to move jobs out of London to ensure they can continue their operations smoothly.
Flint told MPs: “Uncertainty as to where we are going to end up would trigger people thinking earlier about moving jobs, to give themselves access to the passport, the right to do business in Europe.”
He added that London’s financial ecosystem is “like a Jenga tower” and if some jobs start to move, then others could be jeopardised as the closely knit financial, legal, and business service industries in the capital depend on each other.
Conservative MP and Treasury Select Committee chair Andrew Tyrie said in a statement after the evidence session:
“The unanimity among these leading City figures – about the need for a three-year ‘standstill’ at the end of the Article 50 process – is significant. They argued that without such an arrangement, major banks and other financial services firms will take pre-emptive action at a cost, perhaps large, to the sector and the wider economy.
“They also made other important points. Preserving the access arrangements provided currently by passporting is an important objective. Accepting the loss of one part of the financial services industry, such as euro clearing, could have unintended and disruptive consequences, for the UK and the EU. As Douglas Flint put it, the ecosystem in London is like a Jenga tower.”
The House of Lords European Union Select Committee reached a similar conclusion after reviewing the possible impact of Brexit on Britain’s finance sector. The committee wrote in its report: “The interconnectedness of the UK financial system presents serious difficulties for firms and the Government in determining the impact of changes to the relationship between the EU and the UK.”
The head of the British Bankers’ Association (BBA) told Business Insider earlier this week that a transition deal is “essential” and in the “mutual interest” of the EU after government figures showed that the the City makes £50 billion from trade with the EU each year.
Theresa May hinted before Christmas that the UK will push for a transitional deal, appearing to reverse her earlier position. However, there is no guarantee that the EU will be willing to give Britain such a deal to ease the exit process.
Flint told MPs HSBC itself is taking a wait and see approach but is considering Ireland, Holland, or Luxembourg in the event in needs to relocate jobs.
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