Page 47 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

UK Banking and Unintended Consequences
BY MONOCLE RESEARCH TEAM
When voters in northern England chose on the 23rd June 2016 to leave the European Union, they could not possibly have understood the negative consequences for UK bank- ing. Nor, to a large degree, did they seem to care. On the ground, Brexit leaders had focused on the issues of immigration and jobs, whilst naysayers had focused rather on European citizenship and on the bene ts of free trade.
It was only bank executives and some vigilant economists who attempted to argue the consequences on the nancial markets and the ripple e ects that would then ensue. e average voter paid little attention to those they perceived as the City of London elite, following the turbulence of the last eight years of post-Financial Crisis blues.
Nevertheless, just a few months after the vote, UK banking – constituting more than twice the share of the UK economy that it constituted merely 25 years ago – has already been sharply and negatively impacted. ere have been four key e ects of Brexit on the UK banking industry and these will have lasting impact.
Firstly, the UK’s inclusion in the European Union has allowed their banks – Lloyds, HSBC, Barclays and RBS – to ‘passport’ their services across the entirety of the European Union member states. In practice, the removal of this ‘passport’ once Article 50 is invoked will mean that jobs, back-o ce through front-o ce operations, the recognition of revenues, pro ts and the payment of tax will be signi cantly distorted. In essence, some of these aspects of the UK banking business model will have to be moved out of the UK, particularly in respect of lending and trading activities taking place ‘o shore’. e long term impact will be a loss of jobs and a reduction in competitiveness.
Secondly, the market’s perception of the negative impact on the UK economy in general has led to a ight to quality, which in turn had led to
“It was only bank executives and some vigilant economists who attempted
to argue the consequences on the nancial markets and the ripple e ects that would then ensue.”
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