Scottish finance giants draw up Brexit shock ‘contingency plans’

A proposal is being drawn up to guard against the worst possible outcomes of Brexit.
A proposal is being drawn up to guard against the worst possible outcomes of Brexit.
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Leading firms from Scotland’s flagship financial sector have drawn up restructuring “contingency plans” to deal with the impact of a Brexit shock, industry chiefs have warned MSPs.

Scottish Financial Enterprise, which represents giants such as Royal Bank of Scotland and Scottish Widows, said the move is needed to guard against the worst outcomes after the split. It raises the prospect of separate EU bases for firms, alongside their Scottish hubs.

The body is also demanding “certainty” by the end of this year over the kind of transitional arrangements which will operate between the UK and EU in order to bolster confidence among firms. But it comes as EU negotiating chiefs yesterday voiced concerns about the rate of progress of talks.

Scotland’s Finance Secretary Derek Mackay said the intervention shows the danger of an “extreme Brexit” and called for a UK government U-turn which would keep the country in the European single market.

The need for Scotland’s financial giants to be able to trade freely in Europe through the creation of “bridging and adaption” periods after Brexit, has been emphasised by Scottish Financial Enterprise (SFE).

It warns that regulators have demanded full contingency plans from firms to guard against a range of scenarios including “the most adverse potential outcomes”.

“Accordingly financial services companies are putting in place contingency plans and structuring solutions on the assumption that various scenarios could apply,” SFE says in a submission to Holyrood’s Europe committee.

“For those different scenarios, the extent of any disruption will depend on the way that individual businesses require to restructure their current operating models.”

UK banks have previously indicated that restructuring scenarios could involve creating subsidiaries within the remaining countries of the EU to ensure they can keep operating as they have always done following the split. A report last month warned that this could cost UK banks as much as £13 billion in the years ahead.

“Companies want to keep as much of their activities in the UK as possible, which needs to be done within the confines of regulatory and operational considerations,” the submission from SFE states.

“Companies also want to continue to service their existing EU customers and clients following Brexit, with as little disruption as possible.”

A report by the Association for Financial markets in Europe last month warned that more than £1 trillion of assets may need to be “rebooked” or relocated from the UK to a country inside the EU following a hard Brexit, unless alternative arrangements can be agreed.

Edinburgh is the biggest financial centre in the UK outside London.

With giants like Royal Bank of Scotland, Bank of Scotland, the Clydesdale, Scottish Widows, Tesco bank and the newly created global giant Standard Life Aberdeen based north of the border, finance remains one of the country’s flagship sectors.