The UK has voted to leave the European Union (EU). Uncertainty
in financial markets and among the business community is
understandably very high. Today, there are many more unknowns than
knowns – especially about how financial services firms
operating in the UK will access and trade with the EU's Single
Market in future.
But, at least for the time being, some things are certain. From
a purely regulatory perspective, today is much the same as
The UK remains a member of the EU, and is unlikely to be in a
position to leave for at least another two years following an exit
process set out in the Treaty on European Union (TEU).
EU law continues to apply up to the point the UK leaves the
UK firms will continue to benefit from the same market access
they currently have until a formal exit occurs.
This is the calm amid what is otherwise a very turbulent
short-term outlook. The immediate political, market and economic
events over the next few weeks and months will be difficult to
predict or control. In this highly uncertain environment, we expect
the short-term focus for firms to be on managing the financial
impacts and communicating with a broad range of stakeholders, both
internal and external.
This is the first in a series of notes which we will publish as
the process of the UK's exit from the EU unfolds.
Planning considerations for financial services firms
Be ready to respond at very short notice to information
requests from supervisors, both in the UK and elsewhere, about the
impact of market volatility on balance sheets and
Broaden and deepen scenario analysis and contingency
Develop well considered and consistent communications
to internal and external stakeholders.
Consider how future strategies might be affected,
positively or negatively, by the terms of the UK's exit from
Begin to work through detailed plans
and timelines for any relocation strategies that may need to be
Consider the appetite for buying "insurance"
against possible outcomes that could seriously undermine a
firm's business model.
Dealing with an uncertain outlook
For some financial services firms, particularly those which use
the UK as a hub to passport or provide services on a cross-border
basis into other EU Member States, the terms of access which the UK
negotiates to the Single Market will be fundamental to their future
strategy and business models. For many of these firms,
"waiting and seeing" until the outlook becomes clear will
be untenable, given the lengthy lead times associated with moving
substantial blocks of business and potentially people.
These firms face a period of decision-making under significant
uncertainty. To operate successfully in this environment will
require meticulous planning, including scenario analysis and
contingency planning, the identification of triggers to activate
elements of those plans, and, in some cases, taking early decisions
to secure maximum flexibility and optionality for the future.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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