The Government has been notified that it has less than six months to finalise a Brexit deal to prevent an exodus from the City of London.
Sir Howard Davies, the RBS chairman, warned that there is currently a “very, very, very tight” time frame for ministers to agree to the terms of a transitional Brexit agreement with the European Union if it hopes to prevent major finance firms from relocating jobs abroad.
The senior banker, who has assumed the role as chairman of the Government-owned RBS in 2015, claimed that firms would only wait until March 2018 before triggering contingency plans to relocate away from the United Kingdom.
However, Sir Howard suggested that member states of the European Union have “no incentive” to speed up negotiations over the Prime Minister’s hoped-for interim deal, as the longer they “drag this out,” the more chance there is of jobs transferring to other European finance centres such as Amsterdam, Frankfurt or Paris.
In an interview, Sir Howard claimed that as a result of Brexit, the City of London would surely suffer job losses.
“If we go in for Brexit we will find that jobs will leave the City and there will be a rebalancing of financial activity within Europe,” said Sir Howard.
Sir Howard implied that there would be “quite considerable” damage to the City over time because Japanese, Chinese, and US banks have “chosen to put the enormous lion’s share of activity in Europe based in London.”
“They’re now rebalancing and that’s going to happen whatever the outcome of the Brexit negotiations are,” Sir Howard stated.
However, Sir Howard added that RBS, which was prevented from failing by a taxpayer-funded bailout in 2008, would see only a “relatively small” number of jobs relocate to Amsterdam under its Brexit contingency plan.
The plans of the Prime Minister for a transitional deal with the European seeks to ensure certainty for businesses that are based in the United Kingdom, as such an agreement should observe the same trading conditions set up for the period that is immediately following the formal withdrawal of Britain from the bloc in March 2019.
Currently, the European Union are refusing to enable the United Kingdom to move on to discussions regarding a future trading relationship or a transition deal until key divorce issues are negotiated.
Sir Howard insisted that if the Government hopes to prevent firms from shifting resources away from London, the terms of any transition deal should be known within the first three months of 2018.
“If nothing is certain by the end of the first quarter of next year, by March, then people will trigger those contingency plans,” said Sir Howard.
“Because they won’t have time to put them in place by March 2019 unless they start at least a year ahead.
“That’s the moment at which we need to know what the transition arrangements are.”
The RBS chairman continued that the tight time frame for the talks on Brexit revealed the “unwisdom” of triggering the formal notice for EU departure, Article 50, “without knowing what the endpoint was.”