U.K.-based banks could stop exit plans or even recall employees who have been moved to different locations in the EU should the U.K. be able to strike a deal to retain access to the single market, senior banks told the Financial Times.
British and EU negotiators reached a breakthrough in negotiations around the U.K.'s exit from the bloc Dec. 8, although the deal has still raised questions about the country's ongoing membership of the single market. Banks and other financial services providers based in London rely on the passporting access into the rest of the EU provided through the single market and have indicated plans to move various numbers of employees should that access be lost.
One executive at a large U.S. institution told the FT that if the U.K. government were successful in pulling off an 11th-hour deal to retain single market access, then banks like his would reverse their relocation decisions. The executive added that lenders found reconsolidating in London "so compelling" that they would be willing to bear the costs, although for those banks that had already transferred clients to new EU entities, there would be a "multiyear adjustment" before U.K. operations were returned to their current state.
Other banks may recall employees who were temporarily relocated to develop their continental operations, but would not want to "mess with people's lives too much," according to a senior executive at another large institution.
Banks and regulators have frequently cited the first quarter of 2018 as something of a cut-off point beyond which decisions on relocation could not be reversed, but a third executive said this barrier was more likely to be an "emotional point of no return" than a technical one.
A senior executive at another large institution said a deal regarding the U.K's access to the single market would not reverse the organization's plans, but would "hugely slow down," but not stall, its expansion in continental Europe, given the damage done to the U.K.'s image by the Brexit process.
