The two weeks either side of Easter are traditionally a time when the financial services sector take a pause to consider where it stands.
Being often so close to the end of the financial year it is appropriate that the market take stock. However, this year the pause is far more telling. Four months after the UK left the European Union and almost five years after the referendum the financial services sector still has no real timeframe for any agreement over the future relationship between the UK and its former single market partner.
Indeed, the EU has made it clear it is in no rush to reach any agreement, and in the meantime, it is putting increasing pressure on banks and other city institutions to move more of their operations into Europe and out of the Square Mile.
JPMorgan CEO Jamie Dimon said this week in a letter to shareholders that there was pressure on the bank to move more of their staff to Europe as the bloc’s regulators insist that banks and financial institution should have significant operations within the single market to transaction business.
He warned Brexit “cannot possible be a positive” for the UK economy in the short-term and warned that the bank may eventually move all of its European operations out of London.
“In the short run this cannot possibly be a positive for the United Kingdom’s GDP – the effect after that will be completely based upon whether the United Kingdom has a comprehensive and well executed strategic plan that is acceptable to Europe,” he added.
Mr Dimon added: “We may reach a tipping point many years out when it may make sense to move all functions that service Europe out of the United Kingdom and into continental Europe.”
Insurers have remained stoic and moved quickly post the referendum to establish EU operations. However, as we have seen with Lloyd’s Brussels the regulators are seemingly not happy to simply accept the current status quo.
As Lloyd’s CEO John Neal revealed at the market’s press briefing for its annual results last week it has presented four new options to regulators as to the changes it can and will make to meet the concerns of the regulators that the Brussels operation is simply funnelling business back to the UK.
Admittedly the Lloyd’s market is a market and not an underwriting entity and therefore it is a very different beast to an insurers or broker. However, it is indicative of the stance that regulators are taking over any UK insurance entity’s European operation.
The route to an agreement in financial services between the UK and Europe is lengthening and it is likely that there is a number of bumps in the road before the end destination is in sight. The question is just how much that route will impact the market before agreement is reached.