Friday, 5 May 2017

Goldman boss warns Brexit 'will stall' expansion of City



The head of Goldman Sachs has warned that London's expansion as a financial centre "will stall" as a result of the Brexit process.
 
Lloyd Blankfein said the UK's divorce from the EU could see international banks reducing their footprint in Britain.


He also signalled, in an interview with the BBC, that Goldman has contingency plans in place to move staff from the UK to the European Union.


His remarks come a day after the European Commission signalled that it was looking at changes which might threaten London's dominance over the multi-trillion pound euro clearing market.


Mr Blankfein said that for many US businesses the UK was the easiest place to concentrate their European divisions.


But he warned: "If you cannot benefit from access to the EU from the UK - and nobody knows what those rules and determinations will be - then the risk is there will be some adjustment that will cause some people to have a smaller footprint in the UK.


"Without knowing how things will turn out we have to plan for a number of contingencies."


The Goldman chief executive was asked if Brexit could mean the expansion of London as a financial centre in recent decades going into reverse.


He said: "I don't think it will totally reverse.


"It will stall, it might backtrack a bit, it just depends on a lot of things about which we are uncertain and I know there isn't certainty at the moment."


Mr Blankfein signalled that he favours a Brexit transition period of at least "a couple of years" once divorce talks complete in 2019.


Without this, he said, the bank "may have to do a range of things as a precaution and take steps".


Goldman's European boss Richard Gnodde said in March that it would begin moving hundreds of people out of London before any Brexit deal is struck.
 
 
The Wall Street investment bank employs 6,500 people in the UK.


Catherine McGuinness, policy chairman at the City of London Corporation, said that Mr Blankfein and other bank bosses were right to plan for what impact different negotiation scenarios might have.


"Some of these may relocate to other global financial sectors and the City might not grow as quickly as it otherwise would have done.


"But this is entirely down to what sort of deal we get."


She called for a Brexit deal allowing for "access to international talent, a transitional agreement and a bespoke deal that enables two-way access from the EU27 to the UK".


The Goldman chief executive's comments come days after JP Morgan said it planned to move hundreds of jobs to Dublin, Frankfurt and Luxembourg in readiness for Britain's departure from the EU.


Standard Chartered also confirmed this week that it had contacted German regulators about plans to set up a Frankfurt subsidiary to safeguard its European business.


On Thursday, the European Commission confirmed it was looking at whether clearing for euro-denominated derivatives - now mostly done in the UK - would need to relocate to the EU.


EU officials will carry out an assessment and report back with legislative proposals in June.


An independent report by EY last autumn said up to 83,000 clearing jobs could be lost over the next seven years if euro-denominated clearing leaves London.


Chancellor Philip Hammond said: "We should be careful of any proposals which might disrupt growth, raise the cost of investment in Europe and the UK or weaken financial stability."


He said London's position as the world's number one financial centre benefited the whole continent and that Brexit negotiators should "see the value in not undermining that".




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