Select Milano Monitor
Select Milano Monitor 21/03/2017
By Mariarosaria Marchesano
17 March 2017
Summary from Italian:
· The government’s programme to make Milan the financial capital of Europe was presented this morning at the Triennale in Milan by Finance Committee Chair Maurizio Bernardo and Deputy Minister of Economy Luigi Casero. Details of the plan were not delved into, but an appeal was launched by the government to all political forces and civil society to come together to promote Milan within this context. The task force will comprise 130 experts who will work in various capacities to support the movement for Milan.
· Though this movement was launched over a year ago by Select Milano, Mr Bernardo states that the new task force will undertake lobbying of a high-profile nature.
· Mr Bernardo further stated that the Committee will soon present to Parliament a proposal for a special law in Milan with concrete solutions to attract foreign investors to more effectively compete against Frankfurt and Paris.
· Another solution sought by the government is increased capacity within the judicial system to support the mass of litigation generated by a financial district. A parliamentary resolution seeks to extend responsibilities for financial disputes and recourse to the European Court of Arbitration.
· Finally, a survey was presented on Milan residents’ opinions towards Milan’s potential hosting of the European Medicines Agency (EMA); 75% reported that they were in favour of this proposal.
By Fabrizio Patti
18 March 2017
Summary from Italian:
· On the back of last week’s presentation by members of the government regarding the promotion of Milan as a financial capital within Europe, a bill will be presented this week to make Milan more attractive to international investors. This includes a reduction in the IRAP tax for foreign investors, a reduction of the tax wedge and a simplification of administrative procedures related to planning and infrastructure costs.
· Other tax benefits could be in the pipeline given input by the 130 experts of the government’s new Brexit task force.
· Bepi Pezzulli of Select Milano emphasised that investors do not choose countries, but financial districts; Milan can act as a bridge to help London solve the Brexit issue. He asserted that Milan is the only city in Europe that can such a condition to the UK. Mr Pezzulli further noted that, on the political side, a move of clearing activities to Germany would not be received well by other EU countries.
Il Sole 24 Ore
By Pasquale Merella
20 March 2017
Summary from Italian:
· The World Economic Forum confirmed in its most recent Global Risk Report that cybersecurity risk is one of the main global threats facing the world today.
· However, cyber risk can also prove to be an opportunity; groups like CyberParco that are working to promote Italy as a cybersecurity hub in Europe can promote their activities alongside the work of other groups like Select Milano, and even Milan’s EMA candidacy, given the importance of information security to these industries.
By Paolo Panerai
18 March 2017
Summary from Italian:
· Overview of the aforementioned conference in Milan regarding the unveiling of the government’s programme to make Milan a financial capital in Europe. The leadership by Select Milano and Bepi Pezzulli in bringing this matter to light is mentioned.
Milan and Brexit:
By Donal O’Donovan
18 March 2017
Brexit will be bad news for the Irish economy – that’s the near universal view and it’s based on the reality that any future trading relationship between Ireland and the UK will be worse than the current, frictionless, regime.
Even the prospect of Brexit gains for the Irish financial services sector, and by extension Dublin, took its first big hit this week.
That was the stark warning from Financial Services Minister Eoghan Murphy that some rival locations may be actively undermining Ireland’s effort to attract jobs that will leave the UK because of Brexit, by offering lower regulatory standards in exchange for the investment.
In unusually frank language he described “dangerous competition” for Brexit jobs and the potential for what he referred to as “regulatory arbitrage.”
That’s the market’s polite way of describing the benefit of selling the same financial services from lighter regulated bases.
In theory it shouldn’t be possible. Standards, and in many cases actual regulation, should be so similar across the European Union that no one location should be a softer base .
The reality is different. At an event in Dublin this week, Angela Knight, once a minister in John Major’s government and now a financial sector grandee in the UK, explained: “The arbitrage is not so much the rules, as enforcement of the rules.”
Now chair of investment firm Tilman Brewin Dolphin, she said that even when the same rules apply the consequences for getting caught breaking them are not always the same.
“The rigour of supervision, the size of fines” can all be different, she said. For EU regulations something as simple as translation into the national language can produce different results, she said.
On top of that, some cities are aggressively marketing themselves to banks and insurers in London in other ways.
The state government in Hesse, which includes Frankfurt, is talking about relaxing tough – read worker-friendly – labour laws to make it easier for free-booting banks to sack under-performing traders.
Paris, meanwhile, is letting global banks file French paperwork in English.
The potential prize is enormous. Insurers, banks and brokerages employ tens of thousands in London in some of the highest-paid jobs anywhere.
The City of London, Britain’s beating financial heart, dominates the EU’s wholesale banking, capital markets, insurance and specialist financing sectors.
Despite being outside the core Eurozone, firms in London are overwhelmingly the main players in the vast and lucrative business of turning European savings, pensions and insurance policies into the liquid currencies, shares, bonds and loans that fuel all EU economies.
British insurers, and global insurers using London, underwrite everything from consumer holiday cover to cross-border interbank lending.
The head of the Irish Stock Exchange, Deirdre Somers, rattled off the scale of what’s involved at the same British-Irish Chamber of Commerce event where Angela Knight spoke.
Seventy eight percent of the European capital markets are in the UK, 76pc of passporting (selling financial services in other markets) is by UK firms, while 76pc of Europe’s hedge funds are in Britain.
Swathes of that business are potentially up for grabs.
In Ireland the IDA is in the hunt for investment, but regulators are more wary of rolling out the red carpet.
The widespread view is that Irish regulators are playing it straight on Brexit – open to new institutions coming, but burned by our own crash, inflexible on standards such as the need to have substantial business here in order to be licensed.
In practice that approach may make it harder for a bank or insurer to shift here piecemeal from London because it can in effect be paying on the double for regulatory costs during the transition – which could easily last a decade.
It’s still all to play for, but there are early indications are that Ireland may already be losing out. Since last June’s vote to leave the European Union, around 150 jobs at Barclays Bank are Dublin’s biggest Brexit dividend. Chinese banks with ties to the aviation leasing sector are growing in Dublin, though not so far in scale.
Last week Luxembourg scooped a major prize.
By contrast HSBC had announced plans to shift 1,000 jobs to Paris almost before the votes were cast. Goldman Sachs is widely reported in Germany to be shifting 1,000 of its top staff – including traders and executives -to Frankfurt.
Frankfurt, Paris and Dublin are tipped by many as the cities most likely to benefit from Brexit. But there’s a real sense of flux. In Amsterdam, two of Japan’s biggest banks, Mitsubishi UFJ and Mizuho, have been building their presence.
Milan and Madrid see themselves as viable European banking centres, and each is home to major financial institutions.
The specifics of the final Brexit deal will determine how many financial jobs leave the UK, but the battle to win them could become increasingly dirty in the meantime.
Europe and Brexit:
By Eshe Nelson
15 March 2017
When you think of global financial hubs, Dublin doesn’t immediately spring to mind. Indeed, it currently ranks 30th in the Z/Yen Group’s index of financial centers (pdf). But the Irish capital is poised to rise in the rankings, thanks to Brexit.
Since the UK voted to leave the European Union, Britain’s many financial firms have explored setting up new subsidiaries—or even moving headquarters—elsewhere in the bloc, in order to keep a foothold in the EU’s single market. This has set off a battle between European cities to try and tempt banks, insurers, funds and the like.
The minutes of the Irish central bank’s last meeting, in December, revealed the details of a roundtable discussion a deputy governor had in December with financial industry players. On the inbound interest from UK financial firms:
There had been significant levels of interest in authorisations sought for new businesses looking to relocate from the UK. The levels of interest were larger than had been initially anticipated.
Dublin is well positioned to attract Brexit-related relocations for several reasons, including that it’s a short hop from London, shares the same language, and levies some of the lowest tax rates in the Europe. That makes the city less of an underdog in the scramble for Brexit business against established EU financial hubs like Frankfurt, Luxembourg, and Paris.
But Dublin recently complained to the European Commission about the sharp tactics other cities are using to lure British firms. Eoghan Murphy, the minister in charge of promoting Dublin’s financial centre, told Reuters that the cities are being “very aggressive” to get banks and other financial firms to relocate, but Ireland isn’t interesting in “brass plating.” Rather than just setting up a token operation with a brass plate on the door, Dublin expects “the mind and management of the entity” to be in Ireland, according to the central bank minutes.
Banks in London have repeatedly warned that they will shift staff from London to elsewhere in EU in order to maintain their legal ability to provide services across the region. Some estimates from City lobby groups suggest that up to 70,000 financial services jobs may move away from London. British prime minister Theresa May tried to charm bankers in Davos into believing that the economic prospects for post-Brexit Britain are bright, but some have pressed on with their relocation plans regardless.
The size of London’s massive financial industry could make it hard for any other city, including Dublin, to cope with a big influx. Ireland’s central bank is struggling to hire and retain enough staff to deal with the potential growth in authorizations (and subsequent supervision) of relocated firms. At the end of 2016, the central bank had almost 100 fewer full-time staff than it was authorized to hire. It is trying to boost its headcount by another 10% this year, a target the governor has called a “challenging target.”
The central bank is not the only Irish institution straining to staff up after Brexit. Last year, there was a 40% increase in applications for Irish passports from Brits, which has led to extended waiting times.
By Vincent Boland, Oliver Ralph, Jonathan Ford and Jim Brunsden
14 March 2017
Ireland has complained about Luxembourg’s conduct in the race to lure post-Brexit business away from the City of London in a sign of the intense competition among European financial centres.
Eoghan Murphy, the Irish financial services minister, has told the European Commission that rivals are engaging in “regulatory arbitrage”.
Mr Murphy’s complaint was lodged on March 1, before Dublin lost out to Luxembourg in the race to be the location of choice for AIG. The US insurance company said last week it had decided to set up an operation in Luxembourg to secure its EU base after Brexit.
“We are hearing from various sources that companies are being offered certain incentives, that they are offering a back door to the single market, without the requirement to have capital to back up their entities in the European Union,” Mr Murphy told Reuters.
Luxembourg dismissed Mr Murphy’s comments. “I didn’t expect the Irish to be sore losers,” said Nicolas Mackel of Luxembourg for Finance, the agency that markets the grand duchy as a financial centre. “There are plenty of good reasons that international institutions like AIG are choosing Luxembourg as their favoured location, including economic stability, international make-up, its central location and multilingual business culture.”
Mr Murphy raised concerns with Valdis Dombrovskis, the EU financial services commissioner, that there should be consistency in the way regulatory standards are applied across member states, against the background of the risk to stability in the European financial system. The heads of Esma and EIOPA, two key EU financial regulatory agencies, are believed to have raised similar concerns in recent days.
In the aftermath of last year’s British vote to leave the EU, many in the insurance industry identified Ireland as a strong prospect for an alternative base to the City within the bloc. Not only does Dublin have a similar legal system and is in the same timezone, but it has long been considered a satellite of London for financial services.
The Irish central bank increased its staff in anticipation of a deluge of interest from the industry. Beazley, one of the first groups to make its intentions clear, said that it would turn its Irish reinsurance subsidiary into a primary insurance business, and then use it as a base to sell products to the rest of the EU.
Mr Murphy’s complaint suggests the Irish authorities are worried that their hopes of an influx of new insurance business to complement Dublin’s existing strengths in that sector may not materialise.
“Dublin is still on people’s radar, but the Central Bank of Ireland has been stricter than people thought it might be. They have moved from being a light touch regulator to being more serious,” says Oliver Wareham, a partner at Slaughter and May, the law firm.
Karel Lannoo, chief executive officer of the CEPS think-tank in Brussels, said he saw little legal scope for complaints, such as Ireland’s, for other countries to toughen up their own regulations. “This is all about supervision,” he said. For insurers and investment funds, “regulation is harmonised in Europe, but supervision isn’t, and on these matters it’s up to the supervisor to judge”.
Mr Lannoo also noted that the European Securities and Markets Authority, an EU agency in Paris working on “convergence” of supervisory standards, was not yet a powerful body. “They have peer pressure, nothing more,” he said, in comments echoed by an EU official.
Insurance Business Mag
By Louie Bacani
13 March 2017
Lloyd’s of London is seen to tread the same path as insurance heavyweight AIG, which has confirmed plans to establish its post-Brexit EU hub in Luxembourg.
Like other insurers and financial services companies, Lloyd’s is relocating some of its operations from London to elsewhere in the EU to maintain its access to the single market post-Brexit.
Citing sources familiar with the matter, the Irish Independent reported that Lloyd’s was expected to select Luxembourg or Germany as the home of its new European headquarters outside the UK.
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The Financial Times also reported in February that Luxembourg had emerged as the favoured choice of Lloyd’s after shortlisting other locations including Ireland, the Netherlands and Belgium.
“We want to be able to provide our customers with seamless access to the European Union and vice versa – as we know businesses in Europe will want to be able to access the Lloyd’s market,” a Lloyd’s spokesperson told the publication last month.
Lloyd’s will announce its decision within the first quarter or by Easter, Lloyd’s chairman John Nelson revealed to Reuters earlier this year.
In an interview with Bloomberg TV, Lloyd’s CEO Inga Beale also said that Prime Minister Theresa May’s Brexit speech in January “confirmed that to stay in the single market is not a priority and it’s not going to happen and that means we have to go ahead with our contingency plans.”
May is expected to invoke Article 50 of the Lisbon Treaty imminently, to signal the start of the formal negotiations for an official exit.
By Kalyeena Makortoff
15 March 2017
Japanese investment bank Daiwa is understood to be finalising plans to set up a new European base in Frankfurt as part of its Brexit strategy, a move that will see a number of London staff relocated to Germany.
Daiwa currently serves European clients through its wholly-owned subsidiary – Daiwa Capital Markets Europe – which is headquartered in London.
But the Press Association understands that Daiwa is now on course to set up a new EU hub in Frankfurt in order to continue accessing the single market after Britain leaves the bloc.
The Frankfurt operation is expected to start with less than a hundred employees, staffed by a mix of local hires and transfers from other locations including London and Japan.
Daiwa has around 450 employees across Europe, most of which are based in London – which will remain its regional headquarters.
A firm decision will be made this summer and would revive the firm’s German offices, which were closed down as part of an efficiency drive.
A spokesperson for Daiwa Capital Markets said: “No decisions on either location or timing have been taken with respect to any new EU entity to mitigate the potential impact of Brexit.”
The firm was represented during a meeting between British Government ministers and Japanese executives, who warned at the end of last year that operations would leave London within six months unless passporting for financial services was secured.
In January, Daiwa executives said that the Japanese firm was working with consultants and was considering both Frankfurt and Dublin as locations for a new subsidiary.
If taken, Daiwa’s decision to launch a subsidiary in Frankfurt would make them one of the first financial services firm to commit to Germany’s financial hub since the Brexit vote.
Frankfurt is widely expected to be the main beneficiary of a London banking exodus, though business hubs including Dublin, Paris and Luxembourg are also in the running.
HSBC is on course to move 1,000 jobs from its London office to France, where it already has a full service universal bank after buying up Credit Commercial de France in 2002, and it emerged last week that insurance giant AIG will shift less than a dozen London-based executives to head up a new EU subsidiary in Luxembourg.
Germany has already had a vote of confidence from Lloyds Banking Group which is expected to apply for a license later this year that would convert its Bank of Scotland-branded branch in Berlin into an EU subsidiary.
It is understood that few Lloyds jobs would leave London as a result of the move, as the 300-strong branch is already well equipped to serve European clients.
Others like JP Morgan have yet to settle on a location, though its chief executive Jamie Dimon has said that around 4,000 of its 16,000 UK staff could be shifted out of Britain depending on the outcome of Brexit negotiations, while UBS said it could shift up to 1,500 London workers to the continent.
20 March 2017
Japanese bank Nomura has narrowed down its hunt for a post-Brexit European subsidiary, with Frankfurt emerging as the front runner in the latest vote of confidence for the German financial hub.
Nomura currently serves the bulk of its European clients through its regional head offices in London, but the Press Association understands it is considering fully licensing operations in Frankfurt to continue accessing the EU’s single market for financial services after Brexit.
The lender already has a branch in Frankfurt, though it is unclear how many London staff may be transferred once a final decision is made.
The bank has around 3,000 staff across its Europe, Middle East and Africa operations – 2,500 based in London.
A Nomura spokesman said: “Nomura has not made any final decision on either location or timings with respect to a new EU entity.
“We have been actively planning since before the referendum took place to ensure that we meet the needs of our regional and global clients no matter what the final terms of the UK’s exit from the EU are.
“We will be fully prepared to provide a continued, uninterrupted service to our clients by the time the UK exits the EU in 2019.”
Frankfurt is believed to be the favoured destination for Nomura due to the strength of Germany’s financial regulator, Bafin, which would be trusted with overseeing the complex financial instruments that the firms deals in as part of its investment banking operations.
It means the bank may be joining Japanese firm Daiwa, which is also understood to be finalising plans for a new European base in Frankfurt, which would be launched with fewer than 100 employees and staffed by a mix of local hires and transfers from other locations including London and Japan.
A Daiwa spokesperson said no decision on location has yet been made.
Daiwa and Nomura were represented during a meeting between British Government ministers and Japanese executives, who warned at the end of last year that operations would leave London within six months unless passporting for financial services was secured.
Germany has also received a vote of confidence from Lloyds Banking Group, which is expected to apply for a licence later this year that would convert its Bank of Scotland-branded branch in Berlin into an EU subsidiary.
It is understood that few Lloyds jobs would leave London as a result of the move, as the 300-strong branch is already well equipped to serve European clients.
Rival financial hubs across the EU including Dublin, Luxembourg, Amsterdam and Paris are still in the running to attract financial services, and a number of major banks including JP Morgan have yet to settle on a location.
Chief executive Jamie Dimon has said that around 4,000 of its 16,000 UK staff could be shifted out of Britain depending on the outcome of Brexit negotiations.
20 March 2017
Paris delegates are back in London this week in the hope of luring some of the City’s leading fintech firms to the French capital after Brexit.
Ile de France vice president Othman Nasrou – who is in charge of international affairs and tourism for the Paris region – arrived in London on Sunday night ahead of key meetings with fintech companies and “a few financial institutions” to be held on Monday and Tuesday.
Mr Nasrou will “present all the opportunities and assets, the offerings and the reasons to choose (the) Paris Region” as a new EU home base after Brexit, the Ile de France office said.
It is the latest sign that Paris is ramping up its charm offensive on City firms in hopes of attracting businesses worried about losing access to the single market in financial services after Britain leaves the European Union.
Mr Nasrou’s meetings come only six weeks after Ile de France president Valerie Pecresse last visited London with similar intentions.
She was among a group of Parisian politicians and business groups that hosted more than 60 representatives from UK-based banks, fund managers and insurance firms in the Shard in hopes of drawing more financial firms to London.
Defacto – the local authority responsible for managing France’s business district in the west of Paris – told the Press Association earlier this month that it was charging ahead with plans to build seven new skyscrapers, but was already in a position to accommodate 20,000 additional workers.
“A lot of new companies are arriving in the business district from France and from abroad and what we believe is that Brexit will accelerate that good tendency,” said Defacto boss Marie-Celie Guillaume.
However, experts widely believe that Frankfurt will be the main beneficiary of a post-Brexit exodus considering factors like the strength of its economy within the Eurozone, and the reputation of its financial regulator BaFin.
BaFin hosted around 50 representatives from more than 20 banks in Frankfurt in January for an invite-only workshop which provided guidelines for setting up shop in the country after Britain leaves the EU.
German authorities have been clear that any organisation looking to make the move would have to establish a full team and meet German standards on solvency, liquidity and risk management.
Ireland’s minister responsible for promoting Dublin as a financial centre has reportedly fielded complaints to European Commission officials over the “aggressive” tactics of other rival cities which he claims are offering lax regulation to undercut the competition.
Dublin is among a number of cities considered still in the running to attract financial services, alongside Luxembourg, Madrid and Amsterdam.
By Steven Arons and Gavin Finch
14 March 2017
Bank of America views Dublin as its default destination for a new hub inside the European Union if Brexit means Britain loses easy access to the single market, according to one of the firm’s top executives in Germany.
The Charlotte bank will likely move some jobs to other cities across the EU, including Frankfurt, Madrid, Luxembourg and Amsterdam, Nikolaus Naerger said at a press briefing hosted by the Association of Foreign Banks in Germany. The firm hasn’t made a final decision on Dublin and could choose a different destination, said Naerger, Bank of America’s head of corporate banking in Germany, Switzerland and Austria.
“We will look very carefully who can be the EU passporting entity in future,” and will make the decision on a hub once there is more clarity on where Brexit negotiations are headed, Naerger said. Passporting is the right of banks in one EU country to provide services to the rest of the bloc.
Banks, bracing for the worst, are set to start the process of moving operations into the EU within weeks of Prime Minster Theresa May triggering Brexit talks, which is scheduled to happen by the end of the month. Dublin shares similar laws and regulations as its U.K. neighbor and is the only other English-speaking hub in the European Union, making the city a go-to option for London-based banks seeking uninterrupted EU access post Brexit.
Bank of America already has a fully licensed operation in Dublin, hence why it is the default option, Naerger said. The bank will still maintain a large presence in London, he said.
“Dublin is an emergency, a default option that the bank has,” he said.
The level of interest from firms exploring a move to the Irish capital has been higher than anticipated, central bank deputy governor Cyril Roux said, according to minutes of a Jan. 30 meeting of the bank’s commission published on the central bank website Tuesday.
There’s a wide range of financial companies considering an Irish outpost. Besides banks including Barclays Plc and Standard Chartered Plc, trading platforms like currency venue LMAX Exchange and Bats Global Markets Inc.’s London unit are also on the list. Chicago-based derivatives behemoth CME Group Inc. has examined Dublin as it seeks to ensure its clearinghouse retains access to EU customers, people familiar with the discussions said in November.
General Brexit news:
By Martin Arnold
20 March 2017
Finance chiefs in London are preparing a fresh round of lobbying for lower taxes and looser regulation to sugar the pill of Brexit and maintain Britain’s appeal in the global competition between financial centres.
As Theresa May’s government prepares to activate Article 50 and start the two-year process of leaving the EU this month, senior City financiers are already drawing up ways to protect the sector’s interests.
“The challenge for the UK is not to assume it’s unassailable,” said John McFarlane, chairman of Barclays and TheCityUK lobby group, in an interview with the Financial Times. “Advantage needs to be renewed.”
Mark Hoban, a former Treasury minister, has been asked by TheCityUK to work with his former employers PwC to produce a report entitled “Vision 2025” examining ways to enhance the UK financial services industry after Brexit.
Executives met last week to thrash out ideas, which include making skilled immigration easier, particularly to encourage the development of the financial technology “fintech” sector, and regional supervisory offices.
“There is absolutely no appetite for a regulatory bonfire,” said Miles Celic, chief executive of TheCityUK. “But there is space for a tonal shift.”
As an example, he said Solvency II rules for insurers could be adjusted to encourage infrastructure investment. Others would like the EU’s widely loathed bonus cap to apply only to UK banks’ operations in Europe.
“There needs to be a tangible, compelling economic or collateral reason to be here or to do business here, rather than somewhere else, and this needs to be renewed continually,” said Mr McFarlane.
Big banks, insurers and asset managers with operations in the UK have drawn up contingency plans to cope with a “hard Brexit” that takes the UK out of the EU single market and would make them unable to do business across Europe from Britain. Many are preparing to set up EU headquarters in Frankfurt, Dublin, Paris, Luxembourg or Amsterdam.
Most Wall Street bosses believe New York will be the big winner from Brexit, especially because US President Donald Trump has promised to cut taxes and regulation. Meanwhile, banks, including HSBC and Credit Suisse, are shifting resources to faster-growing Asian markets and many have already moved back-office jobs from London to cheaper locations.
David Davis, the Brexit secretary, said on Wednesday that the government had not made a thorough assessment of the economic impact of leaving the EU without a deal. But fans of a “Singapore on steroids” model for the UK as a low-tax, offshore centre were encouraged in January when Mrs May and her chancellor Philip Hammond said that, if the EU imposed a punitive deal on the UK, it would respond with tax cuts.
Anthony Browne, head of the British Bankers’ Association, called on the government to “normalise” bank taxation, by scrapping the levy and corporation tax surcharge that are due to raise £23.4bn from the sector over six years.
“We understand the government’s need to close the fiscal black hole, but if you want to become more attractive as a global financial centre then having a range of bank-specific taxes is not a good way to go about it,” he said.
“We are committed to global financial standards, set by the G20 and the Basel Committee,” he said, warning that ripping up EU rules would reduce the chances of securing access to the European market based on regulatory equivalence.
He called for trade deals to be struck with countries such as Canada and Australia to offset business lost because of Brexit, adding that the BBA had started work of its own on how to defend the future of the City.
14 March 2017
Parliament has passed the Brexit bill, paving the way for the government to trigger Article 50 so the UK can leave the European Union.
Peers backed down over the issues of EU residency rights and a meaningful vote on the final Brexit deal after their objections were overturned by MPs.
The bill is expected to receive Royal Assent and become law on Tuesday.
This means Theresa May is free to push the button on withdrawal talks – now expected in the last week of March.
The result came as Scotland’s First Minister Nicola Sturgeon announced that she intended to hold a second referendum on Scottish independence at a time when Brexit negotiations are expected to be reaching a conclusion.
Ms Sturgeon said she wanted a vote to be held between autumn 2018 and spring 2019 – but there is speculation that Mrs May will reject the idea of the referendum being held before the Brexit process is completed.
That Brexit process is set to take two years from when Mrs May invokes Article 50, which formally gives the EU notice of the UK’s intention to leave.
Brexit Secretary David Davis said. “We are now on the threshold of the most important negotiation for our country in a generation.”
The EU Withdrawal Bill was passed unamended late on Monday after peers voted by 274 votes to 118 not to challenge the Commons again over the issue of whether Parliament should have a veto on the terms of exit.
The House of Lords also agreed not to reinsert guarantees over the status of EU residents in the UK into the bill, with the government winning the vote by a margin of 274 votes to 135.
Later analysis of the division list for the first Lords vote on EU citizens’ rights to remain in the UK showed that 25 Labour peers sided with the Lib Dems, including former cabinet minister Lord Mandelson.
Earlier, the government had comfortably won votes on the issues in the Commons, with only a handful of Tory MPs rebelling.
Corbyn to ‘challenge plans’
The votes came after Brexit minister Lord Bridges of Headley warned that now was not the time to “return to the fray” by inserting “terms and conditions” in the legislation.
Labour’s spokeswoman Baroness Hayter of Kentish Town attacked the Lib Dems for not being responsible and “falsely raising” people’s hopes on the rights of EU citizens living in the UK.
Liberal Democrat Lord Oates said the government had failed to make concessions over the position of EU nationals living in the UK and called on peers to insist on changes.
Brexit campaigners welcomed the “clear mandate” given to the UK government ahead of the start of official negotiations.
“Now, it’s time to go into these negotiations with some ambition and support the government, so it can secure the very best deal – one that is good for the whole UK, and good for the EU too,” said Tory MP and former minister Dominic Raab.
Labour leader Jeremy Corbyn said the rejection of the Lords amendments was “deeply disappointing” but insisted the opposition would continue to press for the rights of EU nationals to be prioritised and for the maximum parliamentary oversight of the process.
He tweeted: “Labour at every stage will challenge govt plans for a bargain basement Brexit with our alternative that puts jobs & living standards first.”
By Tim Ross and Ian Wishart
20 March 2017
Prime Minister Theresa May will file divorce papers to leave the European Union on March 29, launching two years of complex negotiations that will pit the U.K.’s desire for a trade deal against the bloc’s view that Britain must not benefit from Brexit.
More than 40 years after the U.K. joined the EU and nine months since it voted to leave, Britain’s envoy to the bloc, Tim Barrow, informed EU President Donald Tusk on Monday of May’s plan to invoke Article 50 of the Lisbon Treaty, the mechanism for quitting that has never been used.
At stake in the looming talks is whether Britain — the world’s sixth biggest economy — can regain powers over immigration and lawmaking without derailing trade with its largest market or threatening London’s status as the region’s leading financial center. England’s 310-year-old union with Scotland is also in jeopardy, while the border separating Northern Ireland — a U.K. province — from the Republic of Ireland could become a hard one.
“I want to ensure we get the best possible deal for the United Kingdom,” May said during a visit to Swansea, Wales. The premier said her goals included getting “a good free-trade deal” with the EU and an agreement to collaborate on security after Brexit. “We are going to be out there, negotiating hard, delivering on what the British people voted for,” she said.
The EU is “ready to begin negotiations,” European Commission spokesman Margaritis Schinas told reporters in Brussels. The pound fell, reversing earlier gains, after the announcement. It was trading at $1.2348 at 4.32 p.m. in London, down 0.4 percent on the day. It earlier touched $1.2436, the strongest level this month.
For the EU, the focus will be on ensuring there is no easy ride for the British as it tries to safeguard the stability and the commitment of its 27 remaining member states to the postwar project of deepening economic and political union. It is also tested by growing nationalism at home and meddling from beyond by Russian President Vladimir Putin and U.S. President Donald Trump.
May will soon be working against the clock. Realistically, she has until the end of 2018 to agree the terms of the breakup and try to win the trade deal she wants. If she can’t secure an agreement, Britain will crash out of the EU and over what businesses call a “cliff edge” of uncertainty and higher trade tariffs.
No details of the communication with Tusk’s office were disclosed. EU leaders plan an initial response within two days of May triggering Article 50, before convening a summit in late April or early May to ratify guidelines for their chief Brexit negotiator, Michel Barnier. Officials have said they may wait until June to engage fully, and then German elections in September could serve as another distraction.
There is speculation that May could also try to trigger an election in the U.K., in the hope of winning a bigger majority in Parliament and her own mandate to strengthen her hand at home and in the Brexit talks. Her spokesman, James Slack, rejected the idea of an early election on Monday, telling reporters: “There isn’t going to be one.”
The British premier is up against European leaders who are showing no desire to give her generous terms, fearing that would encourage exit campaigners elsewhere. The EU is already planning to focus the early part of talks on the exit fee — estimated as high as 60 billion euros ($64 billion) — and May has been told she won’t be allowed to “cherry-pick” the best bits of EU membership without bearing the costs.
Irish Prime Minister Enda Kenny has warned the talks could turn “vicious’’ and European Commission President Jean-Claude Juncker has predicted they will be “very, very, very difficult.” David Davis, the U.K. Brexit Secretary, is readying for what “may be the most complicated negotiation of all time.”
May has conceded Britain will have to quit the single market for goods and services — accounting for about 44 percent of its exports — to avoid being bound by European court rulings and the free movement of migrants. She says it would be “rational” for the EU to agree to her terms given the amount of goods and services its companies ship to the U.K. and the security her government provides the continent.
While May says “no deal for Britain is better than a bad deal for Britain,” quitting the bloc without a pact or more time to negotiate one would leave the country exposed to World Trade Organization tariffs, putting duties of around 10 percent on car exports alone. Strengthening May’s hand to push for a so-called hard or clean Brexit is the fact the U.K. economy is defying predictions that voting to leave the EU will spark a recession.
Still, signs are emerging that consumer spending — the engine of the British economy –is starting to slow as the pound’s 17 percent decline since the June 23 referendum drives up inflation.
May faces a high-wire act during the two years of talks. She campaigned to remain in the EU but must now navigate the exit, after succeeding David Cameron, who resigned when he lost the referendum. Having already faced pushback, first from the Supreme Court and then from parliamentarians, she leads a Conservative Party split between lawmakers who want a clean, swift break and those who worry she risks hurting the economy. Fresh calls for a second independence referendum in Scotland from First Minister Nicola Sturgeon only intensify the pressure on the prime minister.
An early flashpoint will be the bill Barnier wants to present Britain with. EU officials say they aren’t willing to discuss trade until that’s settled and that the matter could take until early 2018 to resolve in a best-case scenario. A worst case would see the talks break down prematurely. Other points to be discussed early in the talks include border issues and rights of EU citizens residing in the U.K. as well as Britons living in the bloc.
May’s team has questioned the size of the bill and how much legal obligation Britain is under to pay it. It wants to discuss the exit and the new free-trade deal together, to save time, give businesses certainty and to preserve bargaining power. The two sides may also have to line up a transitional phase to bridge leaving the bloc and new trade rules with banks threatening to shift staff from London if they don’t get time to adjust.
“This is not only the beginning of the process, it’s also the beginning of a process by which the delusions of the Brexiteers will have a very brutal collision with reality,” former U.K. Deputy Prime Minister Nick Clegg said in an interview. “Now they actually have to negotiate with 27 other governments and parliaments — it’s going to be incredibly complex.”
Brexit Minister David Jones told a panel of lawmakers the government is making contingency plans because it is “quite possible” the Brexit talks will collapse without a deal, though he insisted he’s expecting a successful negotiation.
In a sign the U.K. is preparing to fight the EU over paying to leave the bloc, Jones said he welcomed an “extremely helpful” recent report from lawmakers that said Britain could legally quit the bloc without stumping up anything.
The U.K. will publish a paper plan “soon” setting out proposals for a ”Great Repeal Bill,” incorporating EU law into British law on the day the country leaves the bloc, he said. A “large number” of other detailed draft laws will follow, paving the way for the U.K.’s new migration rules and other areas of specific legislation that will need to replace EU laws.
Brexit has started to kill off jobs in London: ‘We’ve already witnessed, what was a handful of jobs leaving, become hundreds. How long before we’re looking at losing thousands, even millions?’
By Ben Moshinsky
16 March 2017
The number of new available jobs listed in the the UK’s financial centre fell 17% in February year-on-year to 6,945, according to a survey by Morgan McKinley.
The number of people seeking jobs dropped by a huge 38% from February 2016, while month-on-month the number of fresh open positions decreased by 23% in February.
Those who did find new jobs in February got an average of a 19% pay rise.
In July, the month after the June Brexit vote, the survey reported that the number of new City jobs plunged 27% while the number of people seeking them dropped 13%.
“Brexit has pushed institutions into two camps,” said Hakan Enver, operations director at Morgan McKinley Financial Services, adding: “On one side we’ve got the ‘business as usual’ team, and on the other we have the institutions that are tired of the government’s hemming and hawing and have already begun to move jobs to other EU countries. It’s the latter group that’s contributed to the quarter drop in jobs available.”
“There’s a chance we’ll see a post Article 50 uptick in April, just as we did post-Brexit,” he said. “But the data suggests that Brexit has had a fundamental depressing effect on City jobs. We’ve already witnessed, what was a handful of jobs leaving, become hundreds. How long before we’re looking at losing thousands, even millions?”
Brexit, and the future status of London as the European Union’s financial centre, has been the main focus for those entering the City’s job market.
Prime minister Theresa May’s government has raised the possibility of a so-called “Hard Brexit,” which prioritises immigration control over membership of the European single market.
Such a move would also lead to the automatic loss of the City of London’s EU financial passport. The loss of passporting rights would be devastating to the City of London. The Financial Conduct Authority (FCA) said earlier this year that 5,500 UK companies rely on passporting rights, with a combined turnover of £9 billion.
HSBC, JPMorgan, and UBS have all warned about job relocations. Jamie Dimon, CEO of JPMorgan Chase, told Bloomberg at Davos that the bank will likely move more people than previously thought. “It looks like there will be more job movement than we hoped for,” Dimon said. The bank employs 16,000 people in the UK.
14 March 2017
Banks could start making plans to move operations out of the UK as soon as Article 50 is triggered – if they have no assurance of an interim deal – London mayor Sadiq Khan has warned.
Mr Khan told MPs on the Commons Exiting the EU committee that banks wanted to know they did not face a cliff-edge move towards World Trade Organisation tariffs.
That would be a “catastrophe” for the sector, he said.
Theresa May is expected to trigger Article 50 later this month, beginning the two-year process of leaving the EU – and talks to establish the UK’s future relationship with the bloc.
The Government has come under pressure to ensure that the UK and the EU come to a free trade agreement avoiding tariff and other trade barriers.
However, Mrs May has said she would rather walk away from talks than agree to a “bad deal”.
City-based financial services firms are worried about the impact of losing “passporting” rights which currently enable them to sell their services freely across Europe.
Mr Khan called on Mrs May to ensure there was an early “interim deal” on transitional trade arrangements and warned banks could not wait for the two-year period to be concluded.
He predicted a “huge” impact on jobs if passporting arrangements are lost and that without clarity on this companies could follow one another out of London.
Mr Khan said: “If, in the next few weeks – post Article 50 being served – they have not got the reassurance that there is going to be an interim deal in two years and one day, they will start making plans to move some of their operations.
“They don’t want to leave.
“They love being in London, because of the technology, the talent, the finance, the legal services, our courts.
“They love that, but they will have no choice but to go, they have told me.”
Mr Khan, who backed Remain the referendum campaign last year, acknowledged that an immediate flight of jobs from London after the Brexit vote had not materialised.
But he pointed to warnings from global banks including UBS and HSBC that they could move thousands of jobs out of London.
By Isabelle Fraser
15 March 2017
New research by the Royal Institution of Surveyors has found that 8pc of the UK’s construction workers come from the European Union and could be lost due to Brexit.
It warned that 176,500 workers could be lost as a result of a hard Brexit, jeopardising a construction pipeline worth more than £500bn.
While 8pc of workers across the country are EU nationals, in London that amount rises to an average of 25pc.
But David Montague, chief executive of housing association London & Quadrant, said that on some sites up to 70pc of the workforce was made up of EU nationals, and Tony Pidgley, the chairman of house builder Berkeley said before the EU referendum that 50pc of his subcontractors were from Eastern Europe.
This threat comes on top of the loss of workers in the ever-shrinking construction industry. Due to an ageing population and a lack of new entrants, put off by the boom and bust cycle, the workforce will decrease by 20-25pc in the next 10 years.
Last month, planning consultancy Arcadis said that the UK must hire more than 400,000 workers every year for the next five years to meet demand for house building and infrastructure projects, without the threat of foreign workers departing as a result of Brexit.
Jeremy Blackburn, head of UK policy at Rics, said: “A simple first step would be to ensure that construction professions such as Quantity Surveyors feature on the Shortage Occupations List.
“Ballet dancers won’t improve our infrastructure or solve the housing crisis, yet their skills are currently viewed as essential, whereas construction professionals are not.”
Rics has also called on the Government to seek out and attract private investors for infrastructure projects and provide skilled international workers with visas.
By Joe Miller
16 March 2017
Germany’s finance minister Wolfgang Schaeuble has said it is in the EU’s interest to have a strong financial centre in London.
Speaking ahead of Friday’s G20 meeting, Mr Schaeuble said he would want to negotiate a Brexit deal in which the City of London remains a global financial force.
He said it was not feasible to move all of the City’s operations abroad.
To do so would involve a huge upheaval, Mr Schaeuble pointed out.
In a keynote address to the IIF Conference in Frankfurt, he said: “I am convinced that for Europe as a whole – and I’m not sure this will be very beloved in Paris – it’s in our own interests to have strong financial centre in London.”
Although he did promote Frankfurt as an alternative EU base for international banks in the wake of Brexit, Mr Schaeuble said he would want to negotiate a deal in which the City of London kept a key role.
However, he cautioned, it had not been easy to “brainstorm” with his British counterparts.
Mr Schaeuble’s comments, made in conversation with UBS chair Axel Weber, come after Mr Weber confirmed that his bank would not wait for the outcome of Brexit negotiations to move up to 1,500 staff from London to an EU base.
The finance minister also declared his support for strong international banking regulations.
In a thinly disguised broadside at the new US administration, which has signalled it intends to roll back Wall Street regulation, Mr Schaeuble said: “I’m fully aware that many of you in the room are not fans of regulation”.
After some nervous laughter, he added that the regulation big banks have had to bear is “far less” than the burden that taxpayers have had to shoulder due to lax regulation.
Mr Schaeuble met his US counterpart, Steve Mnuchin on Thursday. Mr Schaeuble described their discussion as “friendly and constructive”.
On Friday, he will hold discussions with leading finance ministers in Baden Baden at the first G20 meeting of 2017.
By Fraser Bell
17 March 2017
“Britain cannot have its cake and eat it over Brexit negotiations.”
Comments such as this from the Prime Minister of Luxembourg at the height of political tensions following the EU referendum have, perhaps unsurprisingly, become synonymous with the Brexit debate since 23 June. But with the triggering of Article 50 just around the corner, it is surely high time for both sides to stop the political back biting and consider some cold hard truths.
And nowhere is a good dose of reality needed more than the current debate surrounding whether London should remain the central hub for Eurozone clearing. While any shift in operations would clearly be a blow to the City, is it really feasible for Europe to seamlessly become the new kings of clearing given the huge costs and complexity involved?
According to a recent study by the International Regulatory Strategy Group (IRSG), a lack of clarity over post-Brexit clearing will lead to higher costs and decreased growth prospects for banks operating inside the EU. And let’s face it, with Europe facing a wave of populist revolts, no member state wants to commit to long-term capital expenditure projects with so much political uncertainty in the air.
London’s current dominance means that any move in operations to mainland Europe would be extremely expensive, and would be far from easy to implement. To put this into context, around €1 trillion is exchanged in the City every day. When it comes to clearing derivative contracts, such as interest rate swaps, options and other exotic products, the UK is the market leader in euro-denominated transactions, with a daily turnover of over €900bn euros. That’s a staggering 75 per cent of all euro-denominated derivatives transacted in London, according to the Bank for International Settlements.
With these figures in mind, it is hard to envisage a speedy and cost efficient rerouting of clearing business, especially if a transitional deal is not reached. Unless an extensive period is factored in to gradually shift clearing operations beyond the two-year Lisbon Treaty timetable, it would be an uphill task to replicate the reliable and sophisticated infrastructure currently underpinning London’s clearing houses.
Take the underlying network connectivity that has become an integral part of clearing. The settlement of exchange-traded derivatives, where gains and losses on every contract are calculated and reported on a daily basis, would be severely affected by a sudden shift in operations.
Any disruption to the links connecting clearing services could lead to a trading firm incurring losses that wipe out the initial upfront margin. In this situation, the firm would have to restore the capital quickly, or risk its trading position being sold off. With these risks, heightened by the vast volume of trades cleared daily, reliable and stable connectivity to clearing services is fundamental.
On top of this, with firms in the middle of adjusting their business models to fall in line with regulation such as MiFID II, which is forcing all standardised derivatives contracts onto exchanges, the last thing the industry needs is a lack of clarity on where and when to relocate operations.
Despite no clear timescales, clearing houses are pressing ahead by reviewing their existing business to ensure operations run smoothly. Quite apart from the risk element, clearing is a fiercely competitive environment. And with the volumes continuing to increase, clearing houses will be jostling for position. With this in mind, the ability to maintain a consistent customer experience if and when they relocate may prove make or break for some.
Beyond timescales and reviewing operational models, there are wider geographical implications at play here. Financial institutions with major global footprints benefit greatly from focusing their clearing efforts across a few locations, mainly because it reduces the running costs of their clients’ derivatives portfolios. As tempting as it may be for European and UK politicians to make life as difficult as possible for each other, as soon as Theresa May triggers the formal renegotiation starting gun, the point-scoring needs to stop, and a concise transitional plan needs to be agreed.
The City’s stranglehold on clearing has been in place for so long now that any sudden move in operations based on politics rather than pragmatism will only serve to hurt both sides. The clearing cake will be one of the centre-pieces up for grabs in the renegotiation. However, with the costs and complexity involved, Europe needs to ensure it doesn’t bite off more than it can chew. After all, whoever takes the spoils, global banks will only settle for one outcome – seamless and reliable access to clearing services.
Select Milano Monitor 13/03/2017
By Mariarosa Marchesano
13 March 2017
Summary from Italian:
· Milan’s dossier for its candidacy as host of the European Medicines Agency will be presented in mid-March to the board based in London; the board will choose between at least 4-5 cities by June.
· In the context of Milan’s aim to become a financial capital in Europe, its objectives seem more concrete with the potential dissolution of the merger of the LSE Group and Deutsche Boerse; it does, however, face stiff competition from cities like Paris, Frankfurt, Brussels, Amsterdam, Vienna and Warsaw.
· The author discusses the groundwork laid by Select Milano in propelling Milan’s goals of becoming a financial capital, and notes that the group was able to gain the ear of various politicians across different areas of the government.
· Alessandro Pagano, member of the Chamber Finance Committee, estimated that around 11,000 Italians could return from London to Italy if favourable conditions, financially and logistically, are offered. He said that they key is to act united to achieve the vision for Milan due to competition in France and Germany.
· Given concerns surrounding the slowness of the Italian justice system, the EEIG structure proposed by the Parliament would have an internal justice function that replicates Anglo-Saxon law.
By Bepi Pezzulli
11 March 2017
Summary from Italian:
· The European Centre for Medium-range Weather Forecasts (ECMWF) has decided to relocate its supercomputing facilities from Reading (UK) to Bologna (Italy) from 2020.
· The Emilia-Romagna region, of which Bologna is the capital, has committed to investing €50 million in infrastructure to convert an old tobacco factory into the ECMWF’s new home.
· This news is a great success for Italy in the area of supercomputing and high technology, and confirms the effectiveness of the post-Brexit strategy launched by the government, based on the input of the Finance Committee and the support of Select Milano as part of its advocacy for a public-private approach towards the post-Brexit strategy.
· Half of the ECMWF’s budget (€100 million) is funded by direct contributions from member states, with the other half coming from the EU which utilises this agency to perform atmospheric monitoring and climate change analysis. This programme could help boost university science programmes in the region and encourage greater knowledge transfer to benefit economic growth.
DATE AND TIME
Wed, March 29, 2017
10:00 AM – 1:00 PM CEST
John Cabot University – Guarini Campus. Aula Magna
233 Via della Lungara
Professional development event for the Legal and Financial Community
Presentation in English followed by networking aperitif
Bepi Pezzulli: Chairman & General Counsel at Select Milano
An alumnus of the venerable “Nunziatella” Military Academy, Bepi Pezzulli read law at LUISS in Rome, earned an LLM from New York University School of Law, and a JD from Columbia University School of Law, where he was appointed a Harlan Fiske Stone Scholar. After working at law practice Sullivan & Cromwell in New York, Pezzulli joined the European Bank of Reconstruction and Development (EBRD) in London, as legal counsel to the bank’s treasury desk; and then global investment manager BlackRock, as legal director.
Bepi Pezzulli’s legal career has been focused on financial markets and asset management. Aside from his international regulatory expertise, he engages in extensive cross-border deal advisory work.
Pezzulli has been credited by LegalCommunity, TopLegal and Legal500 as the model legal risk manager, for being capable of achieving process optimisation and efficiency of service delivery via the application of quantitative management models to the provision of in-house legal services. He is included in the GC Power List 2016 (Italy) and has received the in-house Community Award as General Counsel of the Year 2016.
Pezzulli serves as Chairman and General Counsel of Select Milano. He writes a weekly column (“Dossier Brexit”) in daily financial newspaper Milano Finanza.
Milan and Brexit:
By Eric J Lyman
13 March 2017
Italy unveiled a plan to allow the ultra-wealthy willing to take up residency in the country to pay an annual “flat tax” of 100,000 euros ($105,000) regardless of their level of income.
A former Italian tax official told Bloomberg BNA the initiative is an attempt to entice high-net-worth individuals based in the U.K. to set up residency in Italy as a way to remain in the European Union after the terms of Brexit become effective.
According to the March 8 plan, qualifying individuals from any country are eligible to take advantage of the law, although the impact on the individual’s tax obligation in their home country would depend on that country’s tax laws.
“The idea is that it will help raise revenue through the taxes collected from these individuals as well as from their economic activities: workers they may hire, property sales, and so on,” Francesco Brandi, a former Italian tax official now a professor with Rome’s Sapienza University, told Bloomberg BNA in a March 9 telephone interview.
The rule applies only to individuals who have been a resident in Italy for a maximum of one of the last 10 years, and it expires after 15 years of residency. Individuals paying the flat tax can add family members for an additional 25,000 euros ($26,250) each.
The local media speculated that the measure would attract at least 1,000 high-income individuals, a number which—if accurate—would add an additional 100 million euros ($105 million) to state coffers.
Not a ‘Done Deal.’
But the measure may not be a done deal. According to Carlo Garbarino, a tax law professor at Bocconi University in Milan, the plan is fraught with problems.
“It may be declared unconstitutional because tax laws are required to be equitable,” Garbarino told Bloomberg BNA March 9 in a telephone interview. “If, say, a Russian oligarch with 10 million euros ($10.5 million) in income relocates to Italy, he will basically pay 1 percent in income tax. Is that equitable?”
By Jonathan Freedland
10 March 2017
In the coming days, perhaps as soon as Wednesday, Brexit will turn from abstract to concrete. A near-theological argument that raged in one form or another for nearly three decades will become hard and material, with a fixed deadline. Theresa May is about to trigger article 50, starting the clock on a two-year journey towards the exit from the European Union. And yet those in charge of this fateful, epochal process – and especially those who most loudly demanded it happen – seem utterly unprepared for it.
Philip Hammond’s budget on Wednesday illustrated the point neatly. The country is about to leave its largest export market, a decision with enormous economic implications. The chancellor had the floor for nearly an hour, his obligation to provide an assessment of the present and future prospects of the British economy. Did he so much as mention the imminent exit from the single market? No. Incredibly, he made just two fleeting references to the EU in the entire address.
Instead the stand-out measure, the one that has dominated political discussion since, was Hammond’s decision to take more tax from a core Tory constituency: the self-employed. Important for those individuals, most certainly; a political unforced error, no doubt. But for this to be the focus following a major economic statement on the eve of Brexit is displacement activity of the most heroic kind.
It’s as if the crew of the Titanic eyed the iceberg ahead and promptly decided to have a big squabble over whether to serve white or red.
This failure to wrestle with what’s coming goes wider. The public conversation since 23 June 2016 has barely differed from the debate before that date, each side – leave and remain – still refighting the EU referendum campaign, uncertain how to get out of the old groove.
That failing is most obvious among the Brexiteers, characterised by a refusal to own their victory and take responsibility for it. So when a voice of experience or authority dares point out the possible dangers ahead, they are either sacked, as was the fate of Michael Heseltine, attacked personally, like John Major, or else branded an “enemy of the people” who refuses to bow to the “popular will”.
Those with concerns are accused of “talking down the country” or lacking sufficient faith – as if, should Brexit make us poorer, the fault will belong to those who didn’t screw their eyes tight enough and believe. Credit to Jonn Elledge for calling this what it is: the Tinkerbell delusion.
This surely has to end with the triggering of article 50. From this moment on, the focus must be intensely practical. No more baggy rhetoric about sovereignty and “taking back control”. From now on, those who got us into this situation have to show they can get us out intact by March 2019.
That will require a major shift among the Brexiteer ministers and in Downing Street. Those close to the pre-negotiations between Britain and the remaining 27 EU states report an unwarranted hubris on the UK side that augurs ill. Too many Brexiteers cling to the campaign’s wishful thinking that we go into these talks as the stronger party, that “they need us more than we need them”, and that so long as we hang tough, the Europeans will buckle and hand us a dream deal.
Such arrogance is likely to be exposed soon. For one thing, it ignores the key structural fact that makes Britain’s negotiating prospects bleak from the start: namely, it is imperative for the EU’s own survival that the UK be left in a visibly, materially worse situation after leaving the EU than it enjoyed before. The logic is not vindictive. If the EU is to hold together it must prevent a Brexit contagion. Any divorce settlement must be ugly enough to ensure the remaining 27 stay with their spouse, no matter how loveless that marriage might feel. In four words, the European strategy for the Brexit talks has to be: pour décourager les autres.
But if British politicians are insufficiently mindful of that built-in obstacle, they are far too blithe about the sheer complexity of the undertaking that is about to begin. They are aiming to unpick 40 years of arrangements, seeking to annul them in a pact that will require the blessing of 27 other sovereign states.
To call it 27-dimensional chess understates the geometry: the final divorce settlement will have to be ratified by 38 different national and regional parliaments. To say nothing of the European parliament, commission and council. Each of these bodies has its own interests, pressures and red lines.
May will have to craft a document that satisfies every one of those competing forces, as well as both chambers of the UK parliament. She will have to do it without pushing Scotland towards a second, more winnable independence referendum or recreating a hard border between Northern Ireland and the Irish republic. And she has to get it done in roughly 18 months. Not for nothing did Dominic Cummings, the mastermind of the Vote Leave campaign, tweet with a candour rare among Brexiteers that leaving the EU was the “hardest job since beating Nazis”.
Or reflect on the supposed aces Britain is confidently looking forward to playing in the upcoming game of Brexit poker. Charles Grant, the sage director of the Centre for European Reform who predicted the leave vote, patiently explains how each one of these assets – which Brexiteers believe will make the Europeans putty in our hands – could create as much angst as advantage.
It’s true, says Grant, that the City of London is valued for the financial services it provides to the EU. But it’s also true that Paris, Madrid, Milan, Frankfurt, Dublin and others are circling, ready to feast on the City’s carcass: they want some of that business for themselves.
The Brexiteers reckon the Europeans won’t want to give up London’s special relationship with Washington. But, says Grant, British “fawning” over Donald Trump alienates many Europeans, making them doubt we share their basic values. As for Britain’s contribution to European security – via its UN seat, Nato and its fabled military – that’s much admired. But not if it’s used as a threat: give us a free trade deal or we’ll pull out the 1,000 British troops recently deployed in the Polish-Baltic area. Talk like that will backfire.
Leavers should be approaching this gargantuan task with a special humility, because it was they who needlessly inflicted it upon us.
Remainers need to adjust to the new reality too. Many may be hoping that, as the price and consequences of exit become ever clearer through these talks, some among the 52% will gradually switch sides. But remainers should contemplate the less cheery prospect that the most ardent Brexiteers, and especially the anti-EU newspapers, will double down in their loathing of Brussels. When the EU 27 demand, say, serious cash for single market access, the Mail and Sun will dip their pen into an even deeper well of venom.
So remainers will need to handle these next two years carefully, readying themselves for the day when the deal is done, and ensuring they have already placed two key questions in the front of the public mind: is this deal better than the set-up we had on 22 June 2016? And if it isn’t, why are we doing it?
Europe and Brexit:
By Huw Jones and Andrew MacAskill
7 March 2017
A draft report on the impact of Brexit on Britain’s financial industry warns banks and staff would “leach” away, undermining the wider UK economy, if they do not have access to European Union markets, according to sources who have read the report.
The report has been written by law firm Freshfields Bruckhaus Deringer for TheCityUK, which lobbies on behalf of the financial sector, and may be published later this month, when Britain formally starts divorce talks with the EU.
Firms are already applying a “base case scenario” that when these talks end in two years’ time no access to EU markets will have been agreed, the sources cited the report as saying.
The report adds that even for financial services firms in Britain that do little direct business with the EU, damage from such a “hard” Brexit to the “ecosystem” of financial, legal and accounting services in Britain would hit them too.
Eroding the financial services industry would weaken Britain’s wider “gravitational pull” and hit other parts of the economy too, the report says, according to the sources.
The warning is starker than the public comments from bankers and Bank of England officials, who have said it would be hard for another financial centre in Europe to replicate Britain’s financial ecosystem.
TheCityUK said in a statement it had commissioned Freshfields to produce the report, but it was not yet complete, and it was too early to make assumptions about the conclusions.
Freshfields declined to comment.
Under the most extreme scenario of no deal being reached with the EU, banks based in London without a subsidiary in the EU would be unable to provide sales, underwriting and distribution in the debt and equity capital markets on the continent, the report says, according to the sources.
Banks would also be unable to provide investment advice, portfolio management and lending to EU retail clients, it adds.
Early on in the Brexit negotiations, both sides should agree that Britain can have a phased departure from the trading bloc to give governments and businesses longer to adapt, the report says.
Under the currently envisaged timetable, the report warns, banks will not have enough time to prepare themselves for Brexit and their possible departure.
It also argues Brexit could give Britain an opportunity to “re-frame” regulation – a repeated demand of Brexit backers – the sources said.
There are parts of UK regulation that “could be looked at to facilitate business being conducted in the UK,” the report says.
EU policymakers have already warned Britain not to weaken rules after Brexit to retain banks and attract more international financial business.
The report says firms want EU and UK financial companies to be able to access each other’s markets on the basis that their respective rules are “broadly consistent”.
This echoes failed attempts by the EU and United States around 2006 to hammer out an agreement on “mutual recognition” of regulation, which hit legal complexities.
By Mark Kleinman
7 March 2017
The giant financing arm of Ford is examining whether to shift part of its operations to Germany in a move that would raise fresh questions about the future of the car-maker’s UK workforce.
Sky News has learnt that employees at Ford Credit Europe (FCE), which is based in Warley, Essex, were recently informed that the company had commissioned a project to scrutinise the case for applying for a German banking licence.
The move would be aimed at enabling FCE to continue serving European customers.
Executives are understood to believe that an enhanced operation in a remaining EU member state is likely to be necessary for FCE to conduct its business across Europe if – as expected – the UK loses access to the Continent’s financial services passporting regime.
The UK-based business currently ‘passports’ into 11 European countries, including Austria, Ireland and Italy, and has a full UK banking licence authorised by the Prudential Regulation Authority.
FCE, which provides automotive and mobility-related financial products to customers, had a balance sheet of more than £14bn at the end of September, which the company estimated could rise to £15bn by the end of the year.
Like other big car-makers, Ford owns a big credit business which offers vehicle finance and insurance products to customers.
News of the potential application to regulators in Germany comes just days after the automotive group confirmed that 1100 jobs at its Bridgend engine plant in Wales could disappear by 2021.
Unions criticised the Bridgend move, which plunged Ford directly into the heart of the debate about the future of British car manufacturing after Brexit.
Ministers have scrambled to reassure workers across the industry that Brexit will not diminish their employment prospects, and were in damage limitation mode on Monday when the owner of Peugeot and Citroen bought Vauxhall’s European parent company in a £1.9bn deal.
In its most recent update to investors, relating to the quarter ended September 2016, FCE said: “Until the nature of the relationship between the UK and EU is better established, it will not be clear what, if any, effect Brexit has on FCE.”
A spokesman for FCE insisted that the new project related only to the potential application for a German banking licence, and said the issue of relocating the business’s headquarters to Germany was not on the agenda.
He claimed that the project could require additional personnel in the short term, but declined to comment on possible job relocations once the UK has left the EU.
The spokesman also said that the number of people employed at FCE in the UK was “in the low hundreds” but declined to provide a specific figure.
In a letter to staff written before last June’s referendum, Nick Rothwell, FCE’s chief executive, warned of “deep concerns about the uncertainty and potential downsides for our business that could arise if the UK votes to leave the European Union”.
Writing alongside UK director Andy Barratt, he added: “Although the full consequences of this are unknown, we estimate that the potential cost to our business could be hundreds of millions of dollars every year.”
By Victor Reklaitis
10 March 2017
When it comes to Brexit’s winners and losers, Berlin looks set to snag a few victories — especially the city’s growing financial-technology sector.
Germany’s capital has generated buzz for its efforts to attract London’s fintech companies and other startups since the U.K. voted last year to leave the European Union. A rolling billboard (“Keep calm and move to Berlin”) is one of the stunts that have ruffled British feathers.
But Berlin’s gains might not come from a Brexit-driven exodus — that is, from U.K.-based technology companies abandoning their homeland. Instead, its fintech scene will benefit from U.S. and Asian businesses actively choosing Berlin, and not London, as their EU base.
That at least is the prediction from Stefan Franzke, CEO at Berlin Partner, a business development agency. He estimates that Berlin is home to roughly 80 to 100 fintechs and expects that number to double by late 2018.
Most of that growth will come from “our own ecosystem here in Berlin, and that people from Asia and America who want to enter the European market — that they will do it more from Berlin than from London — because nobody knows what the Brexit means for their own business situation,” Franzke told MarketWatch. He was speaking last year, but the recent stumbling blocks to the British government’s EU withdrawal plan have only heightened the uncertainty.
London: Not dead yet, but ceding some ground
To be sure, Londoners have played down the Brexit threat to the U.K. capital’s fintech crown. Prominent venture capitalist Eileen Burbidge, for example, has said the likely loss of passporting — the mechanism that allows businesses to seamlessly operate across the 28 EU member nations — is a clear headache for London’s big banks, but not for the city’s fintech sector.
That sector — populated by companies such as online banks and insurance brokers, peer-to-peer lenders, payment app developers — is less likely to be covered by the regulations designed for the traditional financial industry.
At the same time, Germany is already catching up, by some measures. Funding inflows for the country’s fintech sector totaled $421 million in last year’s first three quarters, topping the U.K.’s $375 million, as shown in the chart above from accounting giant EY.
The U.K. had beaten Germany in this area in the four prior years. It remained ahead when it came to the number of deals, as the chart below shows.
“Owing to a vibrant and rapidly developing fintech ecosystem, Germany has become Europe’s second-largest fintech hub over the past three years, rivalling the U.K.,” EY analysts said in a recent report.
“In light of the Brexit and an expanding fintech ecosystem, Germany is well positioned to capture part of U.K.-bound funding post-Brexit and strengthen its position in the European fintech market,” they added.
Berlin’s advantages, and it’s not all Brexit cheers
But London’s fintech scene is going to be hard to overtake, given advantages like the U.K. capital being a top financial hub and the English language serving as the business world’s lingua franca nowadays.
“There’s been a few hundred years of finance history — trading, infrastructure, legal and everything else. That’s just not going to go away overnight,” Jeremy Sosabowski, chief executive of U.K.-based financial-software developer AlgoDynamix, has said.
Franzke countered that by noting most Berliners speak a language besides German and pointing out one-third of the city’s startup employees are from outside the country. In addition, the German capital offers much cheaper housing and office space, as well as other advantages, he said.
FinLeap — a self-described “company builder” that has launched 11 fintech ventures — uses English as its in-house language, said co-founder Ramin Niroumand, as there are about 30 different nationalities among its roughly 400 employees.
A banking platform — SolarisBank — is the FinLeap venture that might benefit most from Brexit, as it helps companies operating in the EU, Niroumand said. He added that its other ventures might not see much impact. The Berlin-based company’s portfolio ranges from insurance broker Clark to investments platform Savedo.
The company has experienced a specific Brexit effect — a jump in job applications from talent in the U.K., according to Niroumand.
That’s despite the reputation German startups have in some quarters for being copycats — that is, replicating innovative ideas already successful elsewhere rather than breaking new ground themselves. Much of the flak derives from “clone factory” Rocket Internet SE’s RKET, -1.81% strategy over the years.
Niroumand pushed back against those critics.
“For me, ‘copycats’ in general is nothing bad,” he said. “It has such a negative sense, but to find a model which works on another market and adopt it to the local market, it’s not that easy.”
Echoing comments that he made in a blog post, Niroumand also stressed that he thinks Brexit is not an entirely positive thing for Berlin, saying the U.K.’s upcoming departure from the EU is “hurting us all in the end.”
The FinLeap partner emphasized that he isn’t that focused on the threat from British fintech rivals. Instead, he worries about how much ground U.S. and Chinese payments giants — think Visa and Alibaba — are making in Europe.
“I don’t wake up every morning and say, ‘How can I beat London today?,’” he said. “That’s not the way we think.”
By William Turvill
6 March 2017
A German economics minister has spoken confidently of winning euro clearing power from London after Brexit.
Tarek Al-Wazir, a minister for the state of Hesse, said he expects Frankfurt, which is in his district, to be among the beneficiaries.
“It is hard to imagine that most business in euros will be booked in London after Brexit. Europe needs access if anything goes wrong,” he told Reuters in an interview.
“From the [European Central Bank’s] point of view, London is offshore after Brexit.”
He added: “You can expect parts of the clearing business to be spread across many continental locations. I’m confident that Frankfurt can attract part of London’s euro clearing business.”
Several high-profile City figures and financial experts have warned EU nations against making a grab for euro clearing.
Craig Pirrong, a finance professor at the University of Houston and clearing expert, said the process of wrenching the activity from London would be “very complicated”.
“It’s like trying to separate Siamese twins joined at the head or something like that,” he told City A.M.
“All these deals pretty much are going to be done under UK law. So how are you going to have the clearing in Europe and then these deals done in the UK – are they basically going to have to be re-papered, redone?
“There are just a lot of complications just in terms of the legalities of the contracts. You’re not just moving where the book-keeping is done, you’re also moving the jurisdiction of the law… and that’s not an easy thing to do when you’re talking about the mass of contracts involved here, and the amount of money involved.”
He added that, with clearing more spread across the continent, costs for customers would be increased.
Sir Jon Cunliffe, deputy governor of the Bank of England, last month hit out at “currency nationalism”, saying: “Such a policy if applied by all jurisdictions is in the end likely to be a road to the splintering of this global infrastructure – and to further fragmentation of the global capital market – rather than the route to the sound and efficient management of risk.”
He also said a forced move out of London could push up transaction costs for clearing house customers.
By Maya Nikolaeva
10 March 2017
France sets out to dispel a national stereotype in its latest advertising push to lure financial companies from Britain, with the slogan: “You think we don’t work much? We just like to be effective.”
Paris, Frankfurt, Dublin and other European centres are keen to persuade London-based banks to shift some of their business abroad in order to continue to be able to offer services throughout the EU after Britain leaves the bloc.
The French capital started an advertising campaign in London last summer with the catch phrase “Tired of fog? Try the frogs!”
Since then, only HSBC, which already has a subsidiary in Paris, has said it will move significant business to France. It plans to relocate staff responsible for generating around a fifth of its UK-based trading revenue to Paris.
French officials have acknowledged France’s strict labour laws can put off businesses, while bankers say high employers’ payroll charges and a frequently changing tax system put Paris at a disadvantage.
The new advertising campaign, launched in London this week by the Ile-de-France region that includes Paris, seeks to dispel some of these concerns.
“You think we live in a fiscal frenzy? We are just tax-imaginative in the right way,” it says.
A person involved in coordinating the Paris campaign acknowledged that another deterrent for the British firms is uncertainty over the outcome of the French presidential election in April and May.
“On the one hand, they are eager to make a choice and have a maximum of time to organise things…but doing it before French elections is not very logical given differences in the candidates’ programmes,” this person said.
Investors are nervous about a possible win for far-right candidate Marine Le Pen, who calls for a referendum on France’s EU membership and wants to take the country out of the euro. Polls suggest, however, that she will lose in the second round to independent centrist Emmanuel Macron.
12 March 2017
Companies looking for a new home after Brexit have not been put off France by the prospect of an election victory by the far-right National Front, the boss charged with running Paris’ business district has said.
Marie-Celie Guillaume, the head of Defacto – the local authority responsible for managing La Defense, France’s business district in the west of Paris – told the Press Association that companies are keeping an eye on the elections, but that Marine Le Pen herself is not an obstacle to relocating.
When asked whether the mere chance of a far-right victory was causing companies to put off committing to Paris, she said: “I don’t think so, no, because there are a lot of companies arriving and they keep on arriving.”
“A lot of new companies are arriving in the business district from France and from abroad and what we believe is that Brexit will accelerate that good tendency, and that is why the investors have confirmed their interest in building new towers.”
It suggests Brexit is posing a bigger threat to business investment in Britain than the spectre of a National Front presidency in France, although Ms Guillaume said she was “confident” that the drawn-out election process will bump Ms Le Pen out of the race.
Rival presidential candidates including centre-right Republican Francois Fillon and centrist Emmanuel Macron are expected to introduce more business-friendly measures if elected, including loosening the country’s strict employment laws that make it harder to fire workers – a big put-off for banks.
“This is something that is very much expected, particularly in the financial sector. So what we will probably go towards is some flexibility depending on the sector – which is a new position in France,” Ms Guillaume said.
A number of UK-based firms, particularly financial services, have been searching for a new continental home to house their European headquarters or a new subsidiary in order to access the EU’s single market in the wake of Brexit.
It comes after Prime Minister Theresa May confirmed that Britain would scrap its single market membership as part of a hard Brexit.
La Defense is charging ahead with plans to build seven new skyscrapers over the next four years with renewed vigour – and Ms Guillaume says the district is already in a position to immediately accommodate 20,000 additional workers in La Defense.
“Obviously, Brexit has provoked new interest in La Defense,” she said.
But the City of London Corporation, which governs the Square Mile, said it expects London to retain its crown as king of financial services in Europe.
A spokesman for the Corporation said: “Firms see locational options as a straightforward business decision. Factors such as Brexit and national elections will play into these decisions. However, they will not be the sole focus.
“London has long been established as the world’s leading financial services centre, part of which is due to its prosperous relationship with the EU. It is in the best interests to the UK and the remaining EU 27 to continue this strong relationship.
“We firmly believe London will continue to thrive as the world’s leading financial, professional and business service centre.”
However, Ms Guillaume assured that La Defense is not trying to poach business from London and said the district wants to encourage the growth of a diverse business community rather than put all of its eggs in one basket with financial services.
Of the near-500 companies already established La Defense, 16% are insurers and banks, 19% are audit and consultancy firms, while energy and manufacturing make up 18% and 19%, respectively. The rest are are a mix of information, communication and other business sectors.
“It is a strength to have diversity because of course if you have a very, very strong financial sector and something happens in world finance, it’s a catastrophe.”
By Joe Brennan
10 March 2017
Legg Mason, the global investment firm with more than $710 billion (€670 billion) of assets under management, plans to set up a fund management company in Dublin to maintain access to investors in the European Union after Brexit.
“The firm has a management company in the UK and will have one in Dublin to allow us flexibility to serve clients, as needed,” a spokeswoman for the US group told The Irish Times. “As the outline of Brexit becomes clearer, we are well-positioned to respond as needed to ensure we are ready to serve our clients.”
The spokeswoman declined to say how many jobs would be involved. Legg Mason has a range of Irish domiciled and regulated bonds and equities funds, but the management company, under which the funds can be marketed around the EU, is based in the UK.
The news comes a week after UK asset manager M&G Investments announced plans to set up a management company in Luxembourg, quashing speculation that it might choose Dublin.
Global fund assets
More than $2 trillion of global fund assets are domiciled in Ireland in an industry that employs about 14,000 people. While the Central Bank has authorised a number of management companies (ManCos) for EU-regulated funds, known as undertakings for collective investment in transferable securities (Ucits) and alternative investment funds (AIFs), many firms are understood to be weighing setting up so-called super ManCos.
Industry sources said a number of investment firms were now looking at setting up such structures in Ireland as the UK begins its negotiations to leave the EU. They would typically employ between 20 and 50 people to demonstrate that they have substantive operations and that the “mind and will” of the entities are in Ireland.
Meanwhile, the Central Bank’s head of insurance supervision, Sylvia Cronin, said her office had received five insurance authorisation applications in the past four months as firms prepare for Brexit, while a further five companies have signalled a “firm intention” to apply to be regulated in the State. A further 20 insurers have contacted the bank to discuss authorisation, she told an event in Dublin.
Lloyds of London insurer Beazley said it planned to hire additional staff in Ireland to establish a European insurance company in Dublin, while rival Hiscox is also believed to have shortlisted Dublin as it sets up a base to service EU clients after Brexit. Cardiff-based motor insurance group Admiral also signalled it may move business to Dublin.
However, on Wednesday, US insurance giant AIG, which employs 400 staff in Ireland, decided to relocate its European regional headquarters from London to Luxembourg instead of to Dublin.
Separately, Fine Gael deputy leader James Reilly added to Brexit speculation when he said at an Oireachtas committee hearing he knew “for a fact that there are 450 jobs coming to Ireland from a major financial services company”. He didn’t identify the firm.
Taoiseach Enda Kenny told reporters in Brussels as he arrived for an EU summit that he was “absolutely convinced we will win substantial” financial services business from Brexit.
By Huw Jones
9 March 2017
Britain could face limits on the number of euro financial transactions it handles unless it allows European Union supervision of clearing houses in London after Brexit, EU lawmakers said on Thursday.
Britain is Europe’s biggest financial centre, trading and clearing a large number of euros and euro-denominated transactions such as derivatives, supporting thousands of jobs.
After its departure from the EU, Brussels would have no direct say over how risks to EU financial stability from such trading is handled.
“This is about what is the amount of financial risks that you allow somebody else outside the EU to manage. There are limits to what you can allow,” Olivier Guersent, a top official at the European Commission, told the European Parliament’s economic affairs committee on Thursday.
He was responding to concerns from committee members about how the bloc’s system of “equivalence” will work after Britain leaves the EU.
Equivalence refers to the EU granting market access for a non-EU firm if it complies with rules similar to those in the bloc, and Guersent expects banks based in Britain to apply for it.
The lawmakers, who will have a veto over a future EU trade deal with Britain, said they had serious concerns about London still dominating euro-denominated trading after Brexit.
Burkhard Balz, a centre-right German lawmaker, doubted that equivalence offered enough guarantees to ensure “high quality” supervision of euro clearing conducted outside the EU.
“We have serious concerns about the future of these transactions once the Brexit is implemented, and current legislation needs to be adjusted in order to ensure that supervision of euro derivatives falls under the responsibility of EU institutions,” Balz said.
A German centre-left lawmaker, Jakob von Weizsaecker called for a “sliding scale” of measures to stop financial stability risks entering the bloc from outside, with “repatriation” of trading activities as a last resort.
Equivalence was never designed for “systemically important volumes” a Britain outside the EU would represent, another lawmaker said.
The concerns echo comments from the European Central Bank, whose previous attempt to force large swathes of euro-denominated clearing to move from Britain to the euro zone, failed.
Sabine Lautenschlaeger, a top ECB official said this month that keeping euro clearing in London after Brexit would depend on whether the new UK-EU trading terms kept the central bank involved in supervision.
Steven Maijoor, chairman of the EU’s European Securities and Markets Authority, said there was a need to beef up checks of whether non-EU regulators and financial firms continued to meet equivalence requirements.
Under the current system there were clear limits to how much the EU could mitigate risks from euro clearing from outside the bloc, Maijoor added.
By Lisa Du and Katherine Chiglinsky
9 March 2017
American International Group, the global provider of commercial property insurance, said it plans to open an insurer in Luxembourg to write business in the European Economic Area and Switzerland once the UK exits the EU.
“This is a decisive move that ensures AIG is positioned for whatever form the UK’s exit from the EU ultimately takes,” Anthony Baldwin, chief executive officer of AIG Europe, said on Wednesday in a statement. “We are ensuring that our clients and partners experience no disruption from the UK’s EU exit.”
Financial firms are shaping their Brexit plans after Prime Minister Theresa May announced in January that the UK would leave the EU’s single market in 2019, likely spelling the end of passporting, where companies seamlessly service the rest of the bloc from their London operations.
AIG currently writes business in Europe from a single insurer based in the UK. The New York-based company has more than 2,000 employees based in London and has already been cutting staff there and in other cities as part of a separate cost-cutting initiative.
The reorganisation is expected to be completed in the first quarter of 2019, and AIG will retain an insurer in the UK for sales in that market, according to the statement. Nicola Ratchford, a spokeswoman for the insurer, said the company has a few employees already in Luxembourg. She said there might be shifts in the leadership ranks in Europe, but that it is too soon to know how many workers will move, or to comment on real estate decisions.
AIG chief executive Peter Hancock said before the Brexit referendum last year that he’d consider an operations hub in continental Europe if UK voters opted to leave the EU. Luxembourg is among European cities seeking to attract banks and insurers that are looking to open EU hubs.
“Luxembourg, a founding member of the EU, offers us a secure location in a stable economy with an experienced and well-respected regulator in continental Europe close to many of our major markets,” Baldwin said in the statement.
AIG’s Europe segment had about $5.4bn (£4.4bn) in operating revenue last year, about 11 per cent of the insurer’s total, according to the company’s most recent annual report.
13 March 2017
Academics are already planning to leave the UK in the face of uncertainty on their rights after Brexit, university leaders have claimed.
The heads of 35 Oxford University colleges have warned that the institution will suffer “enormous damage” if European Union staff lose their right to work in Britain.
They urged the government to back a House of Lords amendment to the Brexit bill which guarantees protections for EU nationals living in the UK.
In a letter to the Times, signed by vice-chancellor Professor Louise Richardson and all but three Oxford college heads, they said the government’s promises had not provided reassurance.
“Oxford University relies on EU citizens as lecturers, researchers and support staff. If they lost their right to work here our university would suffer enormous damage which, given our role in research, would have reverberations across the UK,” they wrote.
“Our EU colleagues are not reassured by a government which tells them that deportation is not going to happen but declines to convert that assurance into law; some are worried, some are already making plans to leave.
“Many of our staff don’t know whether absences abroad on research contracts will count against them. Others do not know, however longstanding their work and residence, whether their children will be able to remain in the UK.”
Almost a fifth of UK academics in 2015-16 were from the EU.
MPs are expected to throw out the changes to the Brexit bill made by peers when it returns to the House of Commons on Monday.
The bill will then go back to the Lords and, providing peers allow it to pass, the prime minister could trigger Britain’s divorce from the EU as early as Tuesday.
13 March 2017
Top British and American bank executives have set up a group to stimulate closer financial services links between the two countries after the UK leaves the European Union, sources told Bloomberg.
They said the industry lobby group TheCityUK has created a committee led by managers at Barclays and JPMorgan Chase to explore potential trade and investment deals after Brexit.
According to the sources, the committee is working with the UK Treasury and the Financial Services Trade and Investment Board, but it’s not clear yet what agreements will be pursued. Britain is not officially allowed to negotiate new deals until it exits the EU.
Fears UK Prime Minister Theresa May is ready to pull Britain out of the EU single market have been mounting lately. Bloomberg sources said investment banks in London are increasingly concerned the UK and EU negotiators won’t reach an agreement over what May has called a “phased implementation period” for Brexit.
Bankers also worried about London’s ability to retain dominance over European finance, claiming it could lose business to other financial centers such as Frankfurt, Paris, and Dublin.
Financial institutions have already warned a mass exodus of London bankers may start this year.
City banks said they are finalizing post-Brexit plans on how much of their business needs to shift to maintain relationships with the remaining 27 EU member states.
HSBC said it was moving 1,000 jobs from its London-based investment bank to Paris.
JPMorgan Chase CEO Jamie Dimon said more than 4,000 of the bank’s 16,000 UK staff could be displaced. He did not specify, however, where they might move.
Since Britain’s vote to leave the European Union, cities like Paris, Amsterdam, Luxembourg, and Frankfurt have been vying to become the new center of international finance.
France announced seven new skyscrapers will be built in the Paris business district over the next four years as part of the city’s campaign to lure London-based financial companies.
The UK government, however, said it will fight to maintain the City’s position as an international business hub. It is currently studying what agreements may be struck with countries including Australia, Canada, and South Africa.
By Tony Barber
7 March 2017
In the forthcoming Brexit talks, Spain and Poland will be the fourth and fifth-largest countries in the EU-27 camp. Madrid and Warsaw have good reasons for wanting an amicable British departure from the EU. Each favours close post-Brexit relations with London. However, certain points of contention in the Brexit process may not be easy to clear up.
Spanish-UK trade and investment links loom large over Brexit. Spain has a trade surplus in goods with Britain. The UK is the biggest destination for Spanish investment abroad, absorbing about 17 per cent of the total. Banks such as Santander and Banco de Sabadell play leading roles in British finance. No less prominent in the UK are Spanish companies such as FCC in construction and services, Ferrovial in airports and Telefónica in telecommunications. Meanwhile, British companies are the third-biggest foreign investors in Spain.
As Mariano Rajoy, Spain’s prime minister, told a conference in January, the UK is critically important to Spain’s tourism industry. He estimated that almost 17m Britons visited Spain in 2016 — one in five of all tourists. Moreover, some 300,000 Britons reside in Spain. Another half million or more spend part of the year there. About 137,000 Spaniards lived in the UK in 2015, according to the Migration Observatory institute.
These economic and human ties illustrate the need for a sensible Brexit deal. But there is also a political dimension. Europe’s most vocal pro-independence movements are in Scotland and Catalonia. London and Madrid share an interest in containing separatism, an objective arguably more attainable under a constructive Brexit settlement.
One awkward issue is Gibraltar, the British possession on Spain’s southern coast. Madrid has suggested “co-sovereignty” over the Rock, but knows this is a non-starter for the fervently pro-British Gibraltarians.
However, Gibraltar relies on free movement of goods and labour with the EU. “If Gibraltar wants a relationship with the EU, it will have to go through us. And that will require a bilateral agreement between Spain and the UK,” says Alfonso Dastis, Spain’s foreign minister.
In Poland’s case, the conservative nationalist Law and Justice government in Warsaw was profoundly dismayed by Britain’s vote to leave the EU. Aleks Szczerbiak, a University of Sussex professor, explains that the government viewed London as an ally in fending off criticism from Brussels over its adherence to the rule of law.
Warsaw also warmed to the British vision of an EU with some powers restored to national governments. It was reassured by the robust British attitude to Russia, which it contrasted with Moscow-friendly tendencies in Paris and Rome.
Recent high-level contacts between Poland and UK make it clear that, after Brexit, the two sides will strive to maintain close defence and security ties. However, there are potential sources of friction.
Poland receives more money than other EU states from the bloc’s regional aid budget. If Britain were to try to reduce its Brexit bill by limiting its aid commitments, this would go down badly in Warsaw.
Still more important is the status of the roughly 900,000 Poles who live in the UK. The Polish government, keen to stimulate the domestic economy, would like many migrant workers to return home. It estimates that 100,000 to 200,000 will do so because of Brexit.
But any Polish government will feel compelled to defend the rights of Poles who remain in the UK. On this issue, if Britain wants Polish help in securing a good relationship with the EU, it will need to adopt an enlightened approach.
General Brexit news:
By Rowena Mason
7 March 2017
The House of Lords has voted to give parliament a veto over the final outcome of Theresa May’s Brexit negotiations, inflicting a second defeat on the government’s article 50 bill.
Peers supported a Labour-led amendment by 366 to 268, despite the government’s argument that it would “damage the national interest” by making May’s Brexit negotiations more difficult.
Michael Heseltine, the Conservative former deputy prime minister, was one of those leading the rebellion against the government’s position, along with Labour, Liberal Democrat and crossbench peers.
“Everyone in this house knows that we now face the most momentous peacetime decision of our time,” he said. “And this amendment secures in law the government’s commitment … to ensure that parliament is the ultimate custodian of our national sovereignty.
“It ensures that parliament has the critical role in determining the future that we will bequeath to generations of young people.”
The government had rejected the amendment, saying it would weaken May’s hand by denying her the ability to walk away from the negotiating table.
George Bridges, a Tory peer and minister, said it would “make negotiations much harder from day one for the prime minister” by increasing the incentive for EU countries to offer the UK a bad deal in the hope of getting parliament to scupper Brexit.
The Brexit bill will now return to the House of Commons with the amendment forcing May to have a vote on her Brexit deal and another guaranteeing the rights of EU citizens.
MPs are likely to overturn those amendments, although some Conservative MPs remain unhappy that it is not clear whether parliament will get a vote if May ends up trying to take the UK out of the EU without a deal having been struck.
This will send the Brexit bill back to the House of Lords, which may end up backing down and acknowledging the supremacy of the Commons.
May has already verbally promised that parliament will get a vote on her Brexit deal but this will be on a “take-it-or-leave-it” basis, as the choices would be accepting the terms or crashing out of the EU to rely on World Trade Organisation rules.
But the House of Lords decided that the promise of a parliamentary vote on the outcome of the Brexit talks with the EU must be set down in legislation. Earlier, the peers voted against putting the outcome to a second referendum.
There were heated clashes in the Lords as a string of Conservative peers accused other members of trying to frustrate the progress of Breixt.
Lord Forsyth, the former Scotland secretary, said: “These amendments are trying to tie down the prime minister. Tie her down by her hair, by her arms, by her legs, in every conceivable way in order to prevent her getting an agreement, and in order to prevent us leaving the European Union.”
Nigel Lawson, a former Conservative chancellor, said the amendment forcing a parliamentary vote regardless of the outcome of talks would be an “unconscionable rejection of the referendum result, which would drive a far greater wedge between the political class and the British people than the dangerous gulf that already exists”.
The only practical effect would be to create a “political crisis” with highly damaging uncertainty for business and the economy which could only be resolved by a general election, he said.
But another former Tory cabinet minister, Douglas Hogg, denied supporters of the move wanted to stand in the way of the bill.
“The sole purpose is to ensure the outcome – agreed terms or no agreed terms – is subject to the unfettered discretion of parliament,” he said. “It is parliament, not the executive, which should be the final arbiter of our country’s future.”
The amendment would not only enable parliament to reject a “bad deal” but to “prevent Brexit altogether by refusing to allow the UK to leave the EU without agreement”, he added.
By Tom Peck
13 March 2017
Article 50 will not be activated this week, Downing Street has revealed.
Whitehall civil servants had been told to prepare for the triggering of the formal mechanism to withdraw the UK from the European Union as early as Tuesday.
But a spokesman for Theresa May said the Article 50 process would now not be initiated until next week at the earliest.
Asked if the Prime Minister intended to trigger Article 50 tomorrow, her spokesman said: “We have been clear. The Prime Minister will trigger Article 50 by the end of March.”
It had been rumoured that the Article 50 bill would be passed by the Commons on Monday night and receive royal ascent on Tuesday morning, in time for the Prime Minister to formally give notification to Brussels the same day, but Downing Street has dismissed such speculation.
Her spokesman said: “I’ve said END many times but it wd seem I didn’t put it in capital letters quite strongly enough.”
It comes after SNP leader Nicola Sturgeon announced plans to call for a second referendum on Scotland’s independence.
The Scottish First Minister said on Monday morning that a second poll would give Scotland a choice between Ms May’s Brexit deal and remaining in the EU as an independent country.
Responding to that statement, the Prime Minister said: “The tunnel vision that the SNP has shown today is deeply regrettable. It sets Scotland on a course for more uncertainty and division, creating huge uncertainty,” the PM said.
“This is at a time when the Scottish people, the majority of the Scottish people, do not want a second independence referendum.
“Instead of playing politics with the future of our country the Scottish government should focus on delivering good government and public services for the people of Scotland. Politics is not a game.”
By Mark Kleinman
9 March 2017
Theresa May has sought to reassure growing City anxiety about the impact of a “hard” Brexit, promising Wall Street bankers that she will seek to protect London’s crucial role as a global financial centre during negotiations with her European counterparts.
Sky News has learnt that the Prime Minister attended an event hosted by Morgan Stanley on Wednesday night at which she made an explicit attempt to allay fears about a so-called “cliff-edge” at the point of the UK’s departure from the European Union (EU).
Mrs May is said to have told the audience that she recognised the contribution made by Wall Street banks to the British economy – a remark interpreted by senior City figures as addressing concerns that she is lukewarm about the financial services sector.
The event, in central London, was attended by Morgan Stanley boss James Gorman, as well as prominent British businessmen including Douglas Flint, the HSBC chairman, and Martin Gilbert, chief executive of Aberdeen Asset Management.
It comes just days before the PM is expected to trigger the Article 50 process that will culminate in the UK leaving the EU in 2019.
Mrs May had met with Mr Gorman, along with the heads of other US financial institutions, in Switzerland in January, since when their contingency planning ahead of Brexit has intensified.
A person who attended Wednesday’s event said the Morgan Stanley boss had reiterated his desire for Brexit to prompt as few of the bank’s employees to relocate from the UK as possible.
Morgan Stanley was among the major donors to Britain Stronger in Europe, the official campaign group for staying in the EU.
Wall Street banks have warned consistently that the loss of access to the EU’s “passporting” regime, which enables firms to trade seamlessly across Europe’s borders, would lead to them relocating jobs from London.
Recent reports suggested that Morgan Stanley planned to move roughly 300 London-based jobs to Dublin and Frankfurt.
A spokesman for the bank said last month: “Our focus is on ensuring that we can continue to service our clients whatever the Brexit outcome.
“Our strong franchise and material presence in Europe gives us many options, and we will adapt as the details of Brexit become clear. Given all of this, no decisions have yet been made.”
The eventual outcome of banks’ preparations will largely be determined by the scope and duration of any transitional deal enabling them to continue serving clients across European borders from the UK.
Mrs May has said that Brexit will entail the UK leaving both the EU single market and its customs union, prompting calls from business lobbying groups for a bespoke deal which protects the interests of key sectors.
Any explicit move to safeguard the City carries political risk for Mrs May, however, given the low public esteem in which parts of the financial services industry continues to be held.
Morgan Stanley and Downing Street spokesmen both declined to comment on Wednesday’s event or Mrs May’s remarks.
By Joe Watts
8 March 2017
Philip Hammond will set out a Budget to steel Britain for Brexit as he admits the public has deep-seated concerns over the country’s future.
In his first full Budget statement, the Chancellor will concede ministers must work to convince worried voters their children can thrive once Britain quits Europe.
Mr Hammond will also accept many families are still struggling 10 years on from the financial crash that crippled the county’s economy, even though seven of them have been under a Conservative-led government.
But the Chancellor will still use his statement in the Commons on Wednesday to try and give an upbeat assessment of the UK’s economic prospects, as Theresa May prepares to launch EU withdrawal talks.
It comes after Ms May’s hopes of securing smooth passage for her Bill to trigger Brexit, were dealt a blow when the House of Lords defied her and backed a plan to give Parliament, not Downing Street, the final say over any withdrawal deal.
Mr Hammond, meanwhile, was given something of a boost after the Organisation for Economic Co-operation and Development revised up its 2017 growth forecast for the UK, albeit still warning of a Brexit drag on the economy next year.
The Chancellor had already revealed he would set aside a Brexit war-chest of some £60bn by 2020 to help mitigate negative impacts of leaving the EU. Having also previously warned of a pending “roller-coaster ride” for the economy between now and then, his Budget will aim to calm the country ahead of uncertain times ahead.
He was to promise that the country the Government wants to build after Brexit will be “a stronger, fairer, better Britain, outside the EU”.
But Mr Hammond was to add that he “understands the concerns of those who worry about their children’s ability to access the opportunities they themselves enjoyed, in our rapidly changing economy”.
He planned to tell MPs that “a strong economy is built on resilience” and that the Government will continue reducing the deficit, indicating on-going cuts, and “not shirking the difficult decisions on tax and spending, while still investing in Britain’s future”.
But the Chancellor will then say that he knows that “many are still feeling the pinch, almost 10 years on from the financial crash”.
Signalling potential help for cash-strapped households – including a possible further freeze on fuel duty – he was to promise the Government “will do everything it can to help ordinary working families”.
The Chancellor has already set out some planned spending aimed at boosting young people’s education, including £500m for a technical education overhaul and £320m for more free schools, many of which may be selective following on from Ms May’s pledge to roll out grammar school places.
He has also promised a £1.3bn cash boost for social care with councils across the country complaining that the system for looking after the elderly and the disabled is at breaking point.
But his statement comes just weeks before Ms May is expected to trigger Article 50, bringing with it potential economic uncertainty and the prospect of rising prices.
The OECD revised up its 2017 growth forecast for the UK due to a less severe impact from Brexit than it previously anticipated, in a report on Tuesday.
But the 2018 forecast for UK growth of 1 per cent is lower than the rest of the G7, excluding Japan and Italy, with Brexit thought to be a key factor.
The meagre 2018 rise is also the weakest performance from the UK since the depths of the global financial crisis in 2009, with the report stating: “UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom’s future trading relations with its partners.”
Brexit also gave the Prime Minister a headache on Tuesday after peers approved a plan to give Parliament the final say over Brexit.
Lords voted by a large majority for the proposal forcing Ms May to seek Parliament’s backing for any withdrawal deal she agrees with the EU, and also if she decides to see through her threat of pulling Britain out of the EU with no deal at all.
Brexit Secretary David Davis vowed to overturn the changes to the Government’s Bill to trigger Article 50 when it returns to the House of Commons.
By Niamh McIntyre
12 March 2017
Brexit negotiators are confident they can dramatically reduce the size of any bill for leaving the EU, according to legal documents circulated in the Department for Exiting the European Union.
It has previously been suggested that the UK might have to pay around £50bn to the EU after Article 50 was triggered, to plug the deficit in its budget the departure will cause.
The document was drawn up by Martin Howe QC, a founding member of Lawyers for Britain, a group of lawyers who campaigned for Britain to leave the EU in last year’s referendum.
It advises that the demand for payments into the European budget after Britain has left the EU is “wholly without merit in law”, and that it is “hard to see any credible basis upon which the UK could be said to be obliged” to pay for the deficit.
Mr Howe believes that a key point of leverage is the UK’s funds in the European Investment Bank (EIB). The UK has a 16 per cent share of the €63.3bn capital of the bank, amounting to €10.1bn (£8.8bn).
The guidance concludes: “Overall the UK should be entitled on exit to a net payment in its favour, corresponding to the value of its capital invested in the EIB.”
Theresa May is expected to formally trigger Article 50 this week, after the bill paving the way for Britain’s departure is due to be debated on Monday.
Jolyon Maugham QC, a barrister who launched a legal challenge last year arguing that Article 50 should be revocable once it is activated, so that the UK would not be forced to accept any Brexit deal, told The Independent he questioned the credibility of Mr Howe’s advice.
“Martin Howe is an odd choice for the Government to be taking advice from, given that he doesn’t specialise in any relevant field.
“To seek out proper advice, you shouldn’t simply go to a lawyer who tells you what you want to hear.
“It’s not clear that the Government are going to act on this advice, but if it did, it would be a fantastically stupid thing to do.
“It’s rather telling that the Government keeps pushing this line – that there’s being no need to pay the EU any money, that the EU actually owe us money.
“We are being prepared for a complete breakdown in negotiations.”
A Treasury document leaked to The Independent indicates that Theresa May’s plans to rely on World Trade Organisation tariffs in the case of a hard Brexit will cause a “major economic shock”
Crashing out of the EU without a trade deal is the “alternative to membership with the most negative long-term impact” on the economy, it warns.
Relying on World Trade Organisation tariffs would have serious consequences for companies, jobs and food prices, it states. The 36-page report uses language far stronger than that employed in the Treasury’s published analysis of Brexit’s long-term impact on the economy.