Commuters pass by the headquarters of the London Stock Exchange Group in London on March 6, 2019. As Britain is set to leave the European Union (EU) on March 29, UK Finance firms have been preparing for a "no-deal" scenario that they believe would be "catastrophic" for the nation's economy. (Xinhua/Stephen Chung)
LONDON, March 6 (Xinhua) -- As Britain is set to leave the European Union (EU) on March 29, UK Finance firms have been preparing for a "no-deal" scenario that they believe would be "catastrophic" for the nation's economy.
In a recent statement, a spokesperson for UK Finance, which represents more than 250 firms in the UK's finance and banking industry, said that members were looking to put in place a plan to reduce the effects of a no-deal scenario.
"Time is running out to avoid a chaotic 'no-deal' Brexit that would be catastrophic for the UK economy. Firms in the finance industry have put contingency plans in place to minimize disruption for their customers in a 'no-deal' scenario, but critical cliff-edge risks remain including on the transfer of personal data and the operation of cross-border contracts," said the spokesperson.
BREXIT HITS UK FINANCE SECTOR
A number of financial firms in the UK have already made preparations to remain within the European Single Market, by moving their trading offices either from the UK, or selecting cities other than UK-based ones to be their main trading hub on the continent.
MarketAxess, one of the world's largest corporate bond trading venues, said that it had chosen Amsterdam over London as its main base for the EU due to the uncertainty of Brexit -- denying the UK financial sector hundreds of job opportunities.
Alongside this, the Bank of America said it had picked Dublin as the main base for its EU investment banking and markets operations, while Citigroup, Morgan Stanley and Deutsche Bank chose Frankfurt, Germany.
In the light of Brexit preparations, British ship insurer UK P&I Club opted to set up a subsidiary in the Dutch port city of Rotterdam to remain within the European Single Market.
According to a report from consultancy EY released in January, financial services companies have moved almost 800 billion pounds (about 1,054 billion U.S. dollars) in staff, operations and customer funds to Europe since the Brexit referendum.
CALL TO AVERT NO-DEAL BEXIT
The majority of firms say that they are backing proposals to avert Britain leaving the EU without a withdrawal deal -- saying that a no-deal would alter the way the financial and banking sectors both operate.
Mark Carney, Bank of England governor said that a no-deal, no-transition Brexit would, "by clear orders of magnitude", be "materially" worse for Britain's economic outlook than current forecasts.
Alongside this, IHS Markit and the Chartered Institute of Procurement and Supply produced a report in early 2019 that showed UK business optimism about the year ahead had fallen to one of its lowest ever recorded by the survey.
The report said that political uncertainty had encouraged delays to the majority of corporate spending in the UK service sector, which includes financial firms, hotels, retail and restaurants.
There is still much uncertainty surrounding the UK leaving the EU. Much depends on whether UK Prime Minister Theresa May can push a deal through the House of Commons before time runs out to negotiate trade agreements with the EU.
As the political stalemate continues in Westminster, the majority of financial businesses have been advised to prepare for the worst.
EFFORTS TO MITIGATE DISRUPTION
UK Finance created a detailed online document to advise businesses on how to prepare for the UK leaving the EU.
The document itself, written by Stephen Pegge, who is the Managing Director of Commercial Finance within UK Finance, points to mitigating business "disruption" over the UK's departure.
Included within is a step-by-step guide which encourages businesses to use the "TALK" process. The guide highlights the four main components that businesses should consider when preparing for any Brexit scenario: Take time to think about how customers and suppliers may be affected by upcoming changes; Ask bank and finance providers, customers and suppliers early if you may need additional finance; Look into alternative finance options; Know where to go for more information to help your business.
UK Finance also called for politicians to unite ahead of Brexit.
"It is now essential that politicians on all sides of the House work together to agree a way forward and provide much-needed certainty to the electorate and businesses," said the UK Finance spokesperson.