- The possibility of a hard Brexit is worrying financial institutions and fintechs
- Opening an office in Brussels is a ‘logical’ step, according to TransferWise’s CEO
- Around 40% of financial institutions are reportedly planning to move their operations to Europe
Financial firms are moving an estimated £800 billion of assets into Europe due to Brexit anxiety, a study claims. Reports regarding relocation have been making their rounds since 2017 and as 29 March draws near, companies that offer financial services are now more jittery than before. Mrs May’s proposal was already rejected by the House of Commons and the probability of a hard Brexit has significantly increased.
While other firms are still contemplating moving out of the United Kingdom, fintechs in London have reportedly started to move out. Paytech TransferWise, for example, has already made the decision. Based on a report in early January, the firm has opened an office in Brussels. The Estonian-founded company is headquartered in London but decided to move to Brussels to ensure that it is ready for Brexit. TransferWise also confirmed that it has already submitted the requirements to operate in Belgium.
Fintech experts note that a hard Brexit will affect fintechs based in the UK and that TransferWise’s banking license in Brussels will ensure that operations continue. The firm is enjoying popularity in the fintech world because of its cheap overseas transfer rates. Its app has also made it possible for tech savvy users to transfer money internationally without visiting a brick and mortar bank or going to a remittance centre.
“Brussels is at the source of all EU affairs, so an office in the city is a logical step for us”, TransferWise’s CEO Kristo Kaarmann says. “The National Bank of Belgium has made a very good impression on us with their knowledge of the payment and e-money sector and their openness to innovation, and at the same time, it is a very strong and reliable supervisor. We would like to build up an equally productive relationship with the NBB, just as we have today with the British FCA”, he adds.
Since the referendum, almost 40% of firms surveyed said that they will relocate their operations to Europe. Universal banks, investment banks, and brokerages are likely going to relocate based on the figures from the EY Financial Services Brexit Tracker.
It is noted by investment banks that a hard Brexit will expose financial services to trade barriers, a huge problem not only for the financial sector but for the United Kingdom as a whole.
The country is scheduled to leave the European Union on 29 March, an anxiety-riddled ending of a decades' long membership. The United Kingdom joined the European Union in 1973.
“The City is further ahead in implementing its Brexit contingency plans than many other sectors and our numbers only reflect the moves that have been announced publicly. We know that behind the scenes firms are continuing to plan for a 'no deal' scenario. The closer we get to 29 March without a deal, the more assets will be transferred and headcount hired locally or relocated. Inevitably, the contingency plans are for Day 1 only, and in the event of 'no deal' will represent the tip of the iceberg as longer term plans will be more strategic and extensive than those publicly announced to date”, Omar Ali, UK financial services leader at EY, says.
Legg Mason has already moved a part of its operations to Dublin while UBS is going to Frankfurt as its new hub. There is some good news though. According to the EY report, many Asian banks will move to London post-Brexit.
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