Prime Minister Theresa May has pulled the trigger on Brexit and a number of worried corporations are trying to dodge the bullet by shifting their operations out of the UK.
Article 50 was invoked yesterday, starting the two-year clock on the UK government’s negotiations to exit the European Union (EU).
The outcome of the Brexit negotiations will most probably result in the UK losing access to Europe’s single market, which allows companies to trade freely between countries.
May is taking a hard line on immigration and the EU has stressed that if the UK wants access to the single market it has to allow for freedom of movement.
With the prospect of the UK leaving the EU without a new trade deal, several companies are taking action to ensure their businesses are diversified and protected to cushion the blow.
Lloyd’s of London to open Brussels office..
Lloyd’s of London is the latest company to take action after failing to secure passporting rights for UK financial companies to conduct business across the rest of the EU after Brexit.
The world’s biggest insurance market confirmed today it plans to set up a sUBSidiary in Brussels by the middle of next year.
The move will allow it to continue underwriting insurance policies from all 27 EU and three EEA states once the UK leaves the bloc.
Lloyd’s has been lobbying the UK government to guarantee passporting rights but believes “the chances are lower than they were” and has given up on waiting.
Gaming companies to leave..
The group’s announcement came as a survey found that 40% of games companies are considering relocating out of the UK over concerns about losing talent from the EU.
The survey, by industry trade body Ukie, showed that 57% of the industry employs workers from the EU and companies are worried Brexit will create a skills shortage.
The UK is the sixth largest games market in terms of consumer revenue, which last year rose 1.2% to £4.33bn, according to Ukie. The nation has more than 2,000 games companies, with 12,100 full-time employees.
Banks scurry…
JP Morgan Chase & Co. (NYSE:JPM) is reportedly evaluating European cities for moving its banking activities from London after Brexit.
A group of 75 JP Morgan staff have spent the past nine months assessing European cities on fears of losing access to the single market, The Wall Street Journal reported yesterday.
JP Morgan is Europe’s largest investment bank. It employs 16,000 people in the UK and has concentrated much of its European corporate and investment banking activities in London.
JP Morgan chief executive Jamie Dimon has said up to a quarter of the bank’s staff in the UK may have to relocate.
Other banks that have also warned that roles will have to go as a result of Brexit, include HSBC Holdings plc (LON:HSBA), UBS Group (NYSE:UBS) and Citigroup Inc (NYSE:C).
HSBC chief executive Stuart Gulliver has said 1,000 roles will move to Paris in about two years while UBS has said 1,000 of its 5,000 staff could relocate, possibly to Frankfurt or Madrid.
Citigroup has been in discussions with authorities in Ireland, Italy, France, Spain, Germany and the Netherlands as potential locations for setting up a new operation in Europe.
Meanwhile, even UK-focused Lloyds Banking Group (LON:LLOY) has said it will set up a Berlin subsidiary to keep access to the EU post Brexit.
Chief executive Antonio Horta-Osorio told reporters at the full year results last month that Lloyds had launched an application in Germany to set up the subsidiary.
At the time Horta-Osorio warned the macro-economic outlook was uncertain and the bank’s performance was closely tied with the UK economy, where 97% of its business is focused.
Brexit repercussions ...
FXTM chief market strategist Hussein Sayed said the biggest impact will come from financial companies leaving the UK.
"The sector which matters most is unquestionably the financial sector, and I believe many CEO’s won’t wait too long before moving operations elsewhere," he said.
"Without passporting rights, UK financial services firms must have a state level agreement to perform activities in other European Union countries, and we’ve already seen a couple of announcements for major investment banks planning to move some jobs to another EU jurisdiction."
The analyst thinks the pound will head lower if more UK financial firms leave as it would be an indication that Brexit negotiations are not moving on the right path.