US banks are already making plans for the UK leaving the EU

As Wall Street banks start drawing up plans to move to Ireland, the Tories should beware - this is only the beginning.

by Rachel Savage
Last Updated: 10 Sep 2014

There are few things businesses like less than uncertainty - it makes zero sense to invest if everything could be upended at a moment’s notice. That’s why even the faintest whiff of a Brexit – the catchy name for the UK leaving the EU – spells bad news for our economy.

Wall Street banks, including Bank of America, Citigroup and Morgan Stanley, are reportedly already drawing up preliminary plans to move some activities to Ireland, as the impending Eurozone banking union threatens to isolate the UK financial system and the Tories’ Eurosceptic rhetoric continues to know neither sense nor bounds.

‘I’m frankly looking at moving some activities to Ireland. I think the Irish central bank and government would welcome this,’ a UK-based Wall Street bank senior manager told the FT (unsupririsingly wanting to keep their head anonymously below the parapet). ‘It is not so much Brexit, more about legal entity optimisation.’

Most US and Asian banks currently base their European operations in London, as they have ‘passporting’ rights to supply their services across the EU. But US execs are worried those could be lost if the UK did leave the EU.

The European Central Bank taking over oversight of the Eurozone’s banking system later this year is probably exacerbating those concerns. The UK has already gone to the European Court of Justice to challenge an ECB policy that euro-denominated clearing house transactions have to be based on the continent rather than in London.

And they have a decent alternative in Ireland, with its English-speaking workforce and low corporate tax rate. Cameron has promised to hold an in-out EU referendum should he win the next election, so if he is victorious next year Wall Street bigwigs could well decide that safer is better than sorry.

The loser would of course be the British economy. But then again, as with the Scottish referendum, anyone who really believes the EU or the UK is A Bad Thing is probably philosophically wedded to the idea of a huge change. Whether Scottish nationalists or Eurosceptics are prepared for the inevitable economic damage (at least in the short term) is another question.

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