Quick Summary An insight into the talent acquisition implications on the Financial Services sector as a result of the Brexit transition period.4 min Read
Businesses dislike uncertainty. It makes planning hard. Decisions about investment and hiring are delayed. Financial services companies will therefore largely welcome the agreement between the UK and European Union (EU) on a “transition” period after Brexit.
The transition period will be from 29 March 2019 to 31 December 2020
It creates a little more certainty but it’s not set in stone. And, as some commentators have noted, issues about the Irish border, the sovereignty of Gibraltar and the small matter of agreeing the UK’s future trading relationship with the EU, have still to be agreed.
All of which could have big implications for how global banks and other financial services companies trade, where they locate their operations, who they recruit and from where.
If the UK leaves the EU’s single market and Customs Union - as the UK Government plans - financial services companies in the UK will lose “financial passporting” rights (which allow them to serve clients across the EU without the need for licences in different countries). After Brexit – unless regulatory equivalence is adopted and agreed, UK banks and foreign banks with UK subsidiaries will no longer be able to sell to their clients in the EU from London/UK.
It’s unsurprising then that most of our clients in financial services are concerned about Brexit and have been planning for it as a “what if” scenario, even before the UK’s referendum result on its membership of the EU in June 2016.
This planning includes re-locating business functions and staff from London to Continental Europe’s financial centres including Frankfurt, Paris, Milan, Madrid, Luxembourg, Amsterdam and Dublin, in order to allow them to provide services to the EU.
For instance, we’re researching talent landscape for clients looking to relocate large parts of their London business (front-office functions such as trading, sales, corporate finance, capital markets and research and support functions such as risk management, compliance, audit, finance, treasury, legal and HR) to various locations in Continental Europe.
Without financial passporting rights, it isn’t economical to have thousands of workers in London if they’re only servicing UK clients. The market is big but far smaller than the EU, which is the UK’s largest trading partner.
Re-locating business functions and staff is a major undertaking in many areas, not least in HR. Financial services companies must also comply with different national regulations. They’ll also need to move more staff than they initially think, particularly risk and compliance staff, because national regulators in, say, Germany, France and Spain, don’t want shell companies but actual operations. And European governments want a slice of London’s large financial services’ market, boosting their respective employment and GDP.
Before they can do anything concrete, though, financial services companies must persuade staff to re-locate. This is when having a full understanding of the talent landscape is so important. we’ll discuss this subject in more detail in our next blog.