Banks will start taking “irreversible” decisions such as moving staff abroad if no Brexit transition deal is agreed by the end of this year, the head of the City watchdog has warned.
Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), told MPs that would be “the point at which these things start happening” as firms look to be ready for the UK’s departure from the EU in March 2019.
He said the idea of a transition period to smooth the path to Brexit was “an option whose value erodes over time”.
A report last year from consulting firm Oliver Wyman predicted that 65-75,000 financial services jobs could leave the UK due to Brexit – a figure understood to be viewed by Bank of England officials as one of a number of reasonable scenarios.
Earlier this month, deputy Bank governor Sam Woods acknowledged figures compiled by Reuters from banks’ plans that around 10,000 could go in the initial impact of Brexit.
Mr Bailey, speaking to the Commons Treasury Select Committee, said financial firms in Britain were already renting new buildings in the EU as they made contingency plans to continue operations on the continent after a no-deal Brexit – though these moves could be reversed.
He said the process would start to become irreversible if they have to begin relocating staff or hiring – the latter a more difficult process in cities that do not have the financial services talent pool that is available in London.
The end of the year and the beginning of next year was highlighted by Mr Bailey as the critical time for the UK and EU to come to a “strong commitment” on a transition deal.
He said: “That is the sort of date to have in mind that things start to happen that have much bigger consequences.”
Mr Bailey’s warning echoes that of lobby group TheCityUK, which earlier this month said a Brexit transition deal may be “too late” if not agreed soon.
It comes a day after HSBC adjusted its long-standing warning that 1,000 jobs would go to Paris because of Brexit – saying the number could be lower.
Last week Swiss bank UBS said its worst case scenario of 1,000 roles going abroad was unlikely to happen.
The warnings centre on the likelihood that Brexit will result in UK-based firms losing “passporting” rights to sell financial services freely across the EU.
Goldman Sachs, which employs 6,500 people in the UK, has signed a lease to ramp up its office space in Frankfurt and its chief executive Lloyd Blankfein signalled in a recent tweet that he would be spending a lot more time there due to Brexit.
On Monday, he warned that the Wall Street bank was still hoping to fill the large new European headquarters it is building in London but warned there was “so much outside our control”.