9 Jun 2016

Scared about Brexit? - Update

Following up on my post from earlier this year (see below) I want to reply to an important point made by those arguing against Brexit. It is the future of the UK's financial service business, in particular the role of London as the major industry hub in Europe.

Of course no one can predict what the regulatory and tax landscape would be in case of the UK voting to leave the EU.

But a point by point analysis demonstrates that Armageddon is not going to happen.

Retail Banking is - and will remain - a local business. Banks can and will continue to run local subsidiaries in relevant member states.

Wholesale Banking is unlikely to face major impediments. If a company in a member state gets a loan from a consortium organised by a banking team in London it should not face major problems.

Securities Dealing, Broking and Underwriting - the critical skill mass is in London, where would be the alternative, Frankfurt, Paris? The business might face problems, but they are more due to disintermediation by new technology rather than any possible fallout from Brexit.

Asset Management and Private Banking - many retail funds are domiciled in Luxembourg or Ireland, unless there is a specific prohibition of their management being based outside the EU not much would change.

Insurance - an exceedingly over regulated industry. But retail business is already locally managed and wholesale (mainly big-ticket and re-insurance) should not be overly burdened.

So any fear mongering about an imminent mass exodus to Paris or Frankfurt are way off the mark. And this does not take account that business with the 'rest' of the world (yes, there are about 6600 million people not subject to the unelected bureaucrats in Brussels!) should not change and might actually flourish in an environment not subject to dictats from the EU.

Post from 3 March 2016:

A lot of my recent conversations with clients and business friends inevitably end up with a more or less detailed discussion of the upcoming Brexit vote here in the UK.
As an 'Immigrant', albeit one from Central Europe and living in the UK for all my working life I can look at the issue from both the 'In' and 'Out' camp.
But whatever the outcome of the vote, nothing much will change for at least two years. Any departure from the EU will have to be negotiated over a lengthy period, and the implementation of any agreement could take up to ten years.

More important seems to me to be the question what the UK will really achieve by leaving the Union. No more excuses about interference from 'Brussels'. A look at a few topical problems that need an answer makes one sceptical:

Did the billions of compensation gifted to 'victims of PPI mis-selling' improve the standing of British Banks and the City of London as a financial centre?

Why is the discussion about an additional runway at Heathrow, or a completely new airport, dragging on for more than 40 years? (Remember Maplin in the Mid-70s?)

Why are doctors paid (bribed) to avoid making too many referrals to specialists? and no radical measures are taken to train more doctors?

Business is difficult enough so let's not be distracted by endless Brexit Talk.

Politicians and Regulators do their very 'best' to destroy - or at least impede - a smooth functioning of the economy, debts are piled upon debts and the poor saver is left with puny interest - if any - on his savings!
This is the challenge the Financial Service Industry is tasked to accept.

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