Financial services companies will trigger plans to move core operations out of the U.K. in the first quarter of 2018, if a Brexit transition deal with the EU is not agreed by the end of this year, senior City of London figures have told U.K. lawmakers.
"Unless a credible announcement that provides certainty is made this side of Christmas, then my understanding from conversations with businesses and regulators is that in the first quarter, implementation will begin and businesses will start to migrate," Xavier Rolet, chief executive of London Stock Exchange Group Plc, said at an event at the House of Commons on Oct. 18.
Rolet, who has led the LSE since 2009, said that a transition deal to phase in the effect of the U.K.'s leaving the EU was particularly critical for financial services firms — which employ 2.2 million people in the country — and that a period of three years would be needed for the sector, instead of the two years mooted by the U.K. government.
Separately, the heads of two industry trade bodies echoed Rolet's concerns about the urgency of any transition deal to the EU Financial Affairs Sub-Committee of the House of Lords, the U.K.'s upper house.
Simon Lewis, chief executive of the Association for Financial Markets in Europe, told the committee the "very latest" a transition deal would work for its members was the first quarter of 2018.
"The kind of decisions that need to made by our members need to take are complex in their own right. Applying for a broker/dealer licence in another European city is, quite rightly, a costly and time-consuming process," he said.
"Those sorts of actions need to happen and are happening now."
Lewis noted that the deadline set by the EU's chief negotiator, Michel Barnier, for concluding negotiations for any agreement to be ratified on time is now only a year away, and called for existing contracts between banks and EU customers to be grandfathered to "provide certainty for all parties."
Stephen Jones, chief executive of U.K. Finance, which represents 250 financial services groups, said the latest U.K. regulators could start the process of "reauthorizing" the activities of European banks in the U.K. was the end of 2017.
"What businesses need is confirmation that they don't need to execute their contingency plans," he told the committee.
"If there is a standstill or transition agreement for a period of, say, two years, that would provide at least an ability for our members not to execute immediate contingency plans to move their core activities in order to serve their EU customers."