domingo, 23 de outubro de 2016

Pound value drops below $1.22 as May faces tough opposition at EU summit / Brexit: leading banks set to pull out of UK early next year

Brexit: leading banks set to pull out of UK early next year
Anthony Browne, head of the British Bankers’ Association, warns that major lenders are poised to hit relocate button

Daniel Boffey Observer policy editor
Saturday 22 October 2016 21.00 BST

Britain’s biggest banks are preparing to relocate out of the UK in the first few months of 2017 amid growing fears over the impending Brexit negotiations, while smaller banks are making plans to get out before Christmas.

The dramatic claim is made in the Observer by the chief executive of the British Bankers’ Association, Anthony Browne, who warns “the public and political debate at the moment is taking us in the wrong direction”.

A source close to Brexit secretary David Davis said he and the chancellor Philip Hammond had last week sought to offer reassurance that they were determined to secure the status of the City of London.

However, the government’s stated intention to take control of the freedom of movement into the UK is widely recognised among officials to be a hammer blow to any chance of retaining the present terms of trade for banks, particularly given the bellicose rhetoric of major politicians on the continent.

The so-called passporting rights for members of the single market allow UK-based banks to offer financial services to companies and individuals across the EU unimpeded, yet the French president François Hollande is among those who have insisted in recent weeks that hard Brexit will mean “hard negotiation” and that Britain will need to “pay the price” of leaving.

A hard Brexit would involve the UK leaving both the single market, a cental pillar of which is freedom of movement, and the customs union, which could potentially reintroduce tariff and non-tariff restrictions on British imports and exports.

Browne warns that both British and European politicians who appear to be pursuing “anti-trade” goals need to recognise that “putting up barriers to the trade in financial services across the Channel will make us all worse off”.

Browne, whose organisation has been in intense negotiations with the government, further warns the EU that banks based in UK are currently lending £1.1tn, therefore “keeping the continent afloat financially”, and that this arrangement is at risk.

Of Britain’s position, he writes that banking is the country’s biggest export industry by far, and that the current trajectory threatens not just tariff-free trade but the legal right of banks to provide services.

He says: “Most international banks now have project teams working out which operations they need to move to ensure they can continue serving customers, the date by which this must happen, and how best to do it.

“Their hands are quivering over the relocate button. Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.”

Sources close to Davis dismissed speculation that he believed a solution would be for the City to strike an “equivalence” deal with the EU, under which the regulatory systems are recognised by both parties through a one-off agreement. Browne writes that some Brexiters have made such an argument but that such a deal would not be enough to stop banks deserting Britain.

“On this side of the Channel, some high-profile Brexiters have poured scorn on the idea that we need passporting at all and that other regimes such as ‘third country equivalence’ will do.

“But the EU’s equivalence regime is a poor shadow of passporting – it only covers a narrow range of services, can be withdrawn at virtually no notice, and will probably mean the UK will have to accept rules it has no influence over. For most banks, equivalence won’t prevent them from relocating their operations.”

It has been reported that Goldman Sachs is among those drawing up plans to transfer around 2,000 of its employees to a rival European city should the UK lose its passporting rights.

The industry body, TheCityUk, has claimed that up to 70,000 financial jobs could be lost if Britain leaves the EU without a new credible relationship in place for the City of London.

Browne says he understands the motivation of those who are seeking to take business from UK shores, but he condemns politicians who appear to be willing to break up the integrated financial market, which “makes it easier and cheaper for French farmers, German manufacturers and Italian fashion designers to secure funding”.

He writes: “It is understandable that other European cities want to attract jobs from London. Delegations from Frankfurt, Paris, Dublin and Madrid are all coming to the UK to pitch to bankers. I am pro-competition, and long may they try to make their labour market and fiscal policy more attractive to international investors.

“That is not the problem. The problem comes when national governments try to use the EU exit negotiations to build walls across the Channel to split Europe’s integrated financial market in two, in order to force jobs from London.”

The scale of the task facing the UK in striking a good Brexit deal with the EU has been put in stark relief by the apparent collapse of the proposed EU-Canada trade pact.

On Saturday,there were frantic diplomatic efforts to salvage a deal after Canada’s international trade minister, Chrystia Freeland, walked out of talks. She described the situation as “impossible” on Friday and cast doubt on the bloc’s ability to operate effectively after the proposals were blocked by a regional administration in Belgium.

The parliament in Wallonia is holding up the deal, although the region’s leader, Paul Magnette, suggested the standoff could be resolved within days. It has concerns the deal will undermine labour, environment and consumer standards and allow multinationals to crush local firms.

Pound value drops below $1.22 as May faces tough opposition at EU summit
Sterling has lost almost a fifth of its value against the dollar since the referendum in June

Zlata Rodionova

The pound continued its slide as Prime Minister Theresa May faced tough opposition at the EU summit.

At her first EU summit, May reiterated her hope that Britain and the European Union would have a "mature and cooperative" relationship after Britain exits.

However, she has been given a stark warning from both Angela Merkel and Francois Hollande that Britain faces a “rough” and “hard” negotiation – as she pursues a tough approach to Brexit negotiations.

Sterling continued its fall dropping below the $1.22 mark on Friday trading at $1.2197 against the dollar at market closing time.

The currency had a week of high and lows against the dollar dropping as low as $1.2150 earlier in the week, before recovering to a weekly high of $1.2320 on Wednesday.

Kathleen Brooks, of City Index, cautions that hard Brexit fears may start to materialise after the EU summit in Brussels.

"She has already received a chilly reception, with the President of the European Council, Donald Tusk, saying that the other 27 members of the EU will start to work separately from the UK even before we have triggered Article 50.”

“Some reports have suggested that May is not seeking a close relationship with the EU after Brexit, and her reception at the start of this summit suggests the feeling is mutual.".

Such fears could put the pound under pressure, spooking markets once again.

Brooks added that a series of tense comments around the UK’s clean break with the EU could send the pound back to $1.20 against the dollar.

Lukman Otunuga of FXTM said: "It is becoming clear that Sterling has been enveloped by political uncertainty with hard Brexit jitters ensuring prices remain depressed. Although UK data continues to point to some economic stability, Sterling may be destined for further declines as uncertainty entices bears to install repeated rounds of selling."

Sterling has lost almost a fifth of its value against the dollar since the referendum in June and is the worst-performing currency in the world this year.

The pound also hit a new six-year low against the euro on Monday.

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