Richard Gnodde, the co-head of the investment banking division of Goldman Sachs said, that “every outcome is possible” when asked if the bank plans would involve moving some of its employees to Eurozone cities in the wake of the EU referendum.
“If passporting was totally removed, we would have to adjust our footprint and where people were located,” Gnodde said at a conference in London this week.
Passporting is considered the most significant feature of the EU single market for banks and financial institutions.
UK’s passporting rights allow firms in one EU country to provide services to clients elsewhere in the single market.
This means that under current arrangement banks with a UK presence can operate in any of the other 28 countries of the EU bloc.
Once the UK goes out of the EU these rights could disappear, forcing banks to relocate in order to continue their operations on the continent.
Goldman Sachs said that Gnodde was speaking more generally about the banking industry rather than the bank specifically as Goldman Sachs has not yet made any firm decision on the matter.
“As we have already communicated to our employees, there is no immediate change to the way we conduct our business or where we conduct our business,” a spokesperson for Goldman Sachs said in an emailed statement.
So far no UK bank has officially confirmed it is moving jobs onto the continent but many have underlined they will ultimately do what is best for their clients.
“We expect there to be clear evidence of multinational operations shifting the location of their activity out of the UK given the regulatory uncertainties. Financial services are among the sectors that will be most exposed to this process,” Malcolm Barr, an economist at JP Morgan, said in a note on Wednesday.
He warned that access could not be guaranteed without conditions such as the free movement of labour.
“Even if the UK begins to signal that it will compromise on other priorities in order to secure “full” access to the single market in financial services, there is a clear risk that euro-denominated activities relocate to within the EU simply to ensure continuity of relationships,” he added.
Lloyd Blankfein, chairman and CEO of Goldman Sachs said the bank, which was a big donor to the defeated ‘Remain’ campaign, has a long history of adapting to change, and will be working with relevant authorities as the terms of the exit become clear.
“Our primary focus, as always, remains serving our clients’ needs,” Blankfein said.
The credit agency has suggested the UK’s medium-term growth will also likely be weaker, as Britain will find it hard to export to the EU.
Michel Sapin, the French finance minister, said UK banks and financial services may be transferred to the EU as part of Brexit.
6 ways Britain leaving the EU will affect you
6 ways Britain leaving the EU will affect you
1/6 More expensive foreign holidays
The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more
2/6 No immediate change in immigration status
The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay
3/6 Higher inflation
A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum
4/6 Interest rates might rise
The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output
5/6 Did somebody say recession?
Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018
6/6 And we wouldn’t even get our money back
All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget
“Certain big institutions could be tempted, and we should take them into account, to transfer some of their activities to the territory of the EU to have free, direct and simple access to the full range of markets and financial operations. We should prepare for this,” Sapin said in an interview with BBC Newsnight.
More than three-quarters of capital markets' business across the EU is conducted in Britain. About 417,000 people are employed by banks in Britain, and there are another 1.8 million roles in other financial and professional services.Reuse content