The head of Britain’s financial watchdog has warned that the value of a Brexit transition period will start “eroding” by the start of 2018 as banks introduce “irreversible” contingency plans by the start of the new year.
Financial Conduct Authority (FCA) CEO Andrew Bailey told MPs firms were unlikely to back-pedal once they start relocating staff to the EU, or hiring new employees on the continent.
“They are already taking positions ... for instance, they’re renting buildings in places at the moment. I think they would regard those sorts of decisions as essentially fairly reversible,” he told the Treasury Select Committee.
“I think where it really starts to get more irreversible or at least harder - and this is what they all tell me - is in terms of staff, and that is two parts: one is either relocating staff or hiring staff.”
He said firms were very conscious of the Brexit deadline at the end of March 2019 and would have to take action “in advance”, either by persuading staff to move abroad, or by recruiting in markets that are “often much tighter for skills they want” than what they encounter now in the UK.
“So that is why they - and we - tend to take the view that the end of this year, beginning of next year, is the point at which these things start happening.
“Each firm will no doubt give you a slightly different date if you push for precision, but I think that’s the sort of date to have in mind when things start to happen that have much bigger consequences,” Mr Bailey said.
It echoes comments by the head of Germany’s financial regulator Felix Hufeld, who said last week that City firms were nearing the “point of no return”, which he said will be “somewhere around early next year”.
Mr Bailey noted that most banks were preparing for Brexit on the likelihood that no deal will be reached with the EU.
“You can call it hard Brexit, you can call it no deal, but there is no inbuilt assumption that something good happens in this negotiation that in a sense, that, you know, saves the day.”
It comes amid reports that the Bank of England is currently operating under the assumption that up to 75,000 jobs could move from the UK because of Brexit.
The BBC said that number was subject to the outcome of Brexit negotiations.
In a wide-ranging committee hearing, Mr Bailey spoke about the financial watchdog’s investigation into RBS treatment of small businesses which were shifted into its controversial Global Restructuring Group (GRG).
RBS chief executive Ross McEwan has written to MPs outlining a number of “concerns” over the methodology and approach of the FCA’s interim report, which identified a number of failings at the bank.