All this week we are going to be looking at a different aspect of Brexit’s fallout. The obvious impacts are on the world’s currencies and stock markets. But what else is affected that is a bit more under-the-radar?
The City of London has long been hailed as a major financial player in the world’s economy. Much like New York and Tokyo, London has enjoyed having many foreign banks within its city walls. However, because of the Brex it decision, this enjoyment may not last.
Many U.S. based bank groups such as Goldman Sachs, Bank of America, JPMorgan and more had headquarters in London so that they would use the “passport privileges” that being a part of the EU provided. Now that the UK elected to no longer be a part of the EU, these banks are looking to set up shop somewhere else.
Possible locations for these banks include Paris, France and Frankfurt, Germany.
The mass exodus of business (including banks) was one of the warnings that the “remain” camp based their campaign on.
No formal paperwork has been filed from a bank or business as of yet, they are still going to wait out and see what the UK’s relationship to the EU will be. There is a chance (however slim) that the UK may keep a passport relationship with the EU strictly from a business sense without actually being a part of the EU. This “in-but-not-in” relationship is currently being used by Norway, and could serve as a model for the UK.
This seems unlikely though because it would force the UK to abide by the EU’s business practices without having any say in said practices. It would also require either the UK or the EU to show concessions to the other, something that a prideful UK or a spiteful EU is not likely to do.
There’s no doubt that the big US banks want to remain in Europe, the only question is whether they will choose London as their city of choice.
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