Brexit Broadcast: MPs reject all but two amendments to Theresa May’s Brexit plan

Speaker: Jonathan Herbst

So, we had the vote last night and the two amendments went through and the big question is where does that leave us from a financial services industry perspective? So just starting with the political situation – I don’t really want to go into it but essentially the PM has gone off to Brussels to negotiate with the EU in relation to the backstop, and on the other hand the second amendment effectively said that the House of Commons did not wish there to be a ‘no deal’ scenario.

Now, one can have different views on the legal implications of that, clearly, from a strictly legal perspective, if nothing else happens there is a hard stop at the 29th of March but that’s a much bigger picture. Coming to the area that is relevant to our discussion, financial services, where does it leave us? I think where it leaves us is everyone has to carry on with their planning, we don’t have a solution yet. You can take different views on what’s likely to happen but in terms of planning whether you’re a bank, a broker or an asset manager it’s really just carrying on with the work. Now, what that means in practice for your business is going to depend on your situation. There is a huge range of approaches we are seeing between those who have very little coverage with European clients where perhaps they’re taking a view on what is appropriate in terms of carrying on business from the UK. Versus those at the other extreme who have, of course, set up both entities and operational mechanisms to deal with the onshore sales work they're going to have to do and indeed trading sometimes in the European mainland or in Ireland.
So that is that piece, the other thing to flag and this has been a growing discussion the last few weeks or months, is the business back into the UK. In a sense, this was the Cinderella of the Brexit projects in the early days. Clearly people need to be fully focussed on both the transitional permission regime and their longer term solutions in relation to the UK. So to give just a couple of brief examples of that, inward services business where firms are ultimately going to have to decide either to rely on exemptions or to have a branch here or an entity here and also more generally in relation to markets infrastructure and other aspects of getting into the UK.

So that’s the only thing to say, make sure that the project covers the outward and the inwards and really it’s carrying on the work and keeping a close eye on the politics clearly ultimately impacting on the cost-benefit analysis of when you operationalise your plans. Which clearly, given the very tight timing people are doing now, it’s just a question of when and how. So, where do we go from here? The next key dates are the 13th or 14th of February when the Prime Minister is due to come back and present to the House of Commons and there will be further meaningful votes on the position. So really, carry on the commercial planning, look for the next political date and let’s see how it plays out.