City firms set to revive EU relocation plans in 2022, Brexit report predicts

Tracker from EY finds 44% of big UK financial services players are moving staff to bloc or considering it

Last modified on Mon 20 Dec 2021 01.02 EST

City firms are likely to revive plans to shift staff to the EU once Covid-related travel restrictions ease next year, a financial sector report has said, as the number contemplating such moves continues to rise.

Of the 222 largest UK financial services firms monitored by accountancy firm EY since the 2016 referendum, 97 of them (44%) have confirmed they are relocating staff or operations to the continent, or are considering it – up from 41% in January 2020.

While announcements regarding Brexit-related relocations have slowed in recent years, EY suggested further moves had probably been delayed, rather than reversed, over the past year because of Covid lockdowns and concessions on home working.

“It’s been nearly a year since the UK officially left the European Union, but the financial sector is still working through the hangover of Brexit,” said Omar Ali of EY. “While the majority of operational moves were made well ahead of the 2020 Brexit deadline – and before the pandemic – travel restrictions over the last two years have challenged the practicalities of relocation.”

He said firms were likely to ramp up their relocation plans over the next 12 months, assuming the number of Covid cases falls back, amid pressure from EU authorities who have railed against “brass plate” access to their markets, where companies maintain just a token staff presence in the bloc.

“Depending on the trajectory of the Omicron variant and its impact on international travel in the short term, delayed moves should pick up over the coming year, not least due to ongoing pressure from EU regulators,” Ali said.

It is the latest sign of the ongoing impact that Brexit is having on the UK economy. Figures released last week showed a 16% drop in food and drink exports over the first nine months of 2020, a fall which the industry largely blamed on a 24% decrease in sales to EU countries.

Despite the UK officially leaving the bloc at the start of the year, trade negotiations over checks on goods going in and out of Northern Ireland are still going on, a matter further complicated by the resignation of David Frost as Brexit minister over the weekend. On Sunday it was announced that the foreign secretary, Liz Truss, would take over his brief.

It is unclear whether Frost’s resignation could impact or delay talks over whether the UK’s financial sector will be granted “equivalence” – which would allow UK-based firms to serve EU customers across the continent.

“With such ongoing uncertainty, the risk of fragmented markets remains, which is inefficient, costly for all participants, and could ultimately harm the global competitiveness of both markets,” Ali said.

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