(GPA) London – Four months after the historic public referendum to leave the European Union (EU) was narrowly passed, citizens of the U.K. are dealing with more fallout.
The process of the U.K. beginning to leave the EU isn’t officially set to begin until March of next year. Although this is almost a year after the referendum was passed it didn’t take long for the U.K. to start feeling the negative side effects.
The financial sector was deeply invested in the “remain” vote and within days after the results of the referendum the U.K. started to feel fiscal punishment. The first problem was the British pound (£) hitting a 31 year low within 2 weeks of the vote. If that wasn’t bad enough it seems as if bigger consequences may be on the horizon.
Over the weekend during a meeting of the British Bankers’ Association several large banks announced contingency plans to head for mainland Europe early next year. Many smaller banks claimed they would be prepared to move their operations before Christmas.
U.K. leaders didn’t seem to think Brexit would present a challenge to the banking industry’s cross-channel business. The politicians in favor of the “leave” vote were under the impression that banking wouldn’t be hurt under an EU policy of “equivalence” instead of the open exchange policies the banks currently employ.
The problem is the banks say that this “equivalence” policy is only a shadow of the “European passport” system the banks use now. The European passport allows banks to do cross-border business with less regulation.
The banks have warned that the “passport system” is at risk in the upcoming negotiations between the U.K. and the EU. British politicians claim they can probably negotiate to keep this system open but several EU leaders have stated that they would have to also commit to other less popular rules like the free movement of workers and refugees.
Several of the political leaders and parties supported Brexit to curtail the movement of immigrants and workers and it would be a hard sell for them to convince their voters to reverse their position amid fears of refugees and competition with migrant labor.
London is currently one of the financial capitals of the world but should these negotiations go sour that could soon change the entire landscape of British banking and a crucial tax base.