As a ‘no deal’ looms ever larger in Theresa May’s autocratic utterances, many EU administrations are making pre-emptive moves ahead of the official Brexit negotiations.
IDA chief Martin Shanahan is obviously convinced of this strategy. Not wishing to lose key ground to competitor countries, he participated in a series of events in London to promote Ireland’s attractiveness as a venue for any UK-based institutions of a mind to jump ship in the event of a ‘no deal’.
After weeks of speculation, Wall Street giant JPMorgan this week confirmed it was basing some of its London posts in Ireland, with plans to expand the workforce in the Dublin docklands by about 500 people after Brexit. And this paper reported that, in the coming weeks, Ireland hopes two more investment banks — Morgan Stanley and Bank of America Merrill Lynch — will commit to basing jobs here. The Irish campaign is also likely to be a response to the European Commission’s plans to present legislative proposals, in June, affecting London’s future as a major financial centre.
France and Germany have previously suggested Brexit will curb London’s dominance in euro-clearing; it handles three-quarters of all euro currency exchanges and euro derivatives trading. 8,000 jobs may migrate from the City of London, if it were to lose its clearing functions. The EU draft policy document proposes “more centralisation of supervision” of clearing businesses in the EU, if they provide “critical capital market functions”, which London obviously does.
The problem for Ms May, and the British government, is that they want to get outside the EU’s regulatory reach, but retain the UK’s strong position in EU financial markets, the second-largest in the world. The EU plans further legislative proposals to ensure the financial stability of central counter-parties, also known as clearing houses, which manage risk, collect collateral, and guarantee trades in the event that one side defaults. That’s all very reasonable to those within the EU, but presents difficulties for Ms May, who wishes to reject freedom of movement in the bloc and all its institutions. This includes the European Court of Justice, which is one of her redline Brexit pledges.
Financial institutions are opting for an alternative, which is to move their European headquarters from the UK to another jurisdiction inside the EU, from which to passport their financial services.
Ireland will hope to lure more US financial institutions to Ireland, which is the only remaining English-speaking member state in the EU.
Last month, Taoiseach Enda Kenny and the leaders of the Netherlands and Denmark called a mini Brexit summit, at which they urged EU states not to do anything that risks an agreement with Britain. But the latest tweaking of the Brexit guidelines indicates that other EU members have also moved the goalposts on free movement and will now insist that any EU citizen who has been living in the UK for five years must be granted permanent residency.
This marks a significant shift from the original guidelines, which only stated that any future trade agreement should “not endanger financial stability in the union and encompass safeguards against unfair competitive advantages”.
We can only hope that cooler heads will prevail, after the UK general election, when the actual Brexit negotiations start.
John Whelan is a leading consultant on Brexit and Irish trade
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