As much as £50 million ($66.5 million) could be spent to relocate to the European Union (EU) by London-based banks looking to pack up after Brexit, claims a report that was published recently.

On an average, £50,000 ($66,252) per employee would have to be shelled out by banks looking to relocate at least 1000 roles, claims an estimate that was published by global consulting agency Synechron.

Hiring and redundancy, new building, infrastructure and rent costs, and well as contingencies and their financial burden were the considerations that were taken into account while the analysis came to the concluding figure.

Passporting rights which allow financial services to do business across EU member states without needing to obtain licensing in each individual country is expected to be the primary considerations for banks that would look to relocate from London. The report claims that most of such banks and financial services would tend to choose European cities like Amsterdam, Dublin, Paris and Frankfurt, where they would be able to maintain passporting rights to consider setting up shop.

“Financial ‘passporting’ is vital to the work many banks undertake across Europe and they will have to think carefully about which city within the EU their interests and their clients’ interests will be best served,” Tim Cuddeford, a London-based member of Synechron’s Business Consulting Practice said, according to the report.

Fears of losing those passporting rights may be enough to spook London banks into leaving the U.K. following the UK leaving the EU even though incoming financial regulations like MIFID II may provide London-based banks an opportunity to still access the single market.

“Other cities may be just as competitive and worth considering as long as there is access to (a) similar talent pool and infrastructure,” Cuddeford explained.

While 35 percent of the workforce for the relocated banks would be comprised of new hires, 65 percent of staff would be relocated, assumes the analysis as stated in the study.

However the cost estimates that were forecast may prove to be a lower-end estimate.

Capitalization costs or banking licenses, given that they would vary depending on the individual firm and the requirements of each regulator, were not taken into account by the Synechron’s analysis while making the financial forecast.

On the other hand, Synechron explained that new building and rent costs could total £20.6 million alone. An additional 20 percent of the budget would need to be put aside for contingencies.

While this report was published that forecast a significant financial burden on financial institutions seeking to relocate outside of the UK following Brexit, allegations that the Bank of England tried to frighten the British electorate into voting to remain in the European Union (EU) by using “phony forecasts and scare stories”were denied by the bank’s Governor Mark Carney.

The allegations were termed as “extraordinary in all senses of the word” by the Governor while speaking at a U.K. Treasury Committee hearing. The allegations against the Bank of England were made by two former U.K. Chancellors of the Exchequer and two ex-leaders of the Conservative Party.

“If we (the Bank of England) view something as the biggest risk, we have a statutory responsibility to make that clear,” Carney told the committee.

(Adapted from CNBC)

Categories: Economy & Finance