Global banks could leave UK in case of ‘Brexit’ - S&P
“UK-domiciled banks use their UK authorization to provide banking and trading services across the EU and European Economic Area, known as passporting rights. Without these rights, we see a risk that enough major global banks could choose to route their business through other European financial centers,” said the reportpublished Tuesday.
The report says London would still keep its status as a global financial centre should Britain leave the EU, dubbed the ‘Brexit’.
It would hit the UK economy as financial services provide about 1.4 million jobs and attract a huge portion of the foreign direct investment (FDI), S&P added.
“Financial services attract 30 percent of the inward foreign direct investment (FDI) into the UK, equivalent to 17 percent of GDP. Nearly one half of the FDI into the UK financial services sector comes from EU investors,” said the report.
Brexit could result in great damage to the UK's current net trade surplus in insurance and financial services of more than 3 percent of GDP, said Standard & Poor's credit analyst Frank Gill.
The impact crucially depends on what alternative free trade arrangements the UK government could provide to its EU partners if it leaves, Gill added.
Last year Britain’s exports to the EU were almost 50 percent of the total $359 billion worth of goods and services. Foreign companies operating in the UK have duty-free access to a 500 million consumer base in the 28 countries.
S&P is the only rating agency to still give the UK its top-notch AAA rating, and has already warned the UK that it could lose the status should the result of the referendum scheduled for the end of 2017 be to leave the EU.
Some major banks have already started preparing to leave London.
Citigroup of the US is moving its European retail banking headquarters to Dublin to reduce its cost base.
Europe's biggest bank, HSBC is intending to cut 50,000 globally and focus on the faster-growing Asian markets. The bank is also thinking to transfer its headquarters from the UK; a final decision will be made at the end of the year. The HSBC brand name and logo will disappear from Britain's high streets, and be replaced by Midland Bank HSBC acquired in 1993.
Deutsche Bank is studying the impact of Britain’s exit on the company’s business in the country and is looking at moving jobs to Germany, the company said in May.