British Prime Minister Theresa May is in the crosshairs of the worst political storm to hit the United Kingdom in recent memory. After Britons voted overwhelmingly in favour of a Brexit on June 23, 2016, a chain of events has been put into motion. The GBP plunged to a 31-year low against the USD, and the FTSE 100 index capitalized on this by rallying to unprecedented levels. The Prime Minister is navigating a minefield with Brexiteers pushing for a hard Brexit on the one hand, and doves cautioning against such a move. Meanwhile, foreign banks and financial institutions are having none of it. They are putting plans in place to relocate their staff abroad post-Brexit. As yet, none of the top binary options broker companies have signaled any plans to quit the UK in favour of the EU.
A Tectonic Shift in European Financial Operations?
The City of London is the financial epicenter of Europe, and any change to the status quo could wreak havoc on Britain’s economy. As such, the Prime Minister is determined to throw her weight behind the financial services sector to encourage them to remain anchored in Britain. On Thursday, 19 January 2017, she was attending the World Economic Forum in Switzerland, and she made clear her intention to maintain financial services in London. This about turn in May’s posturing is surprising. The banks and financial institutions contribute upwards of £67 billion per annum in taxes to the UK economy, and May does not want to scare them off.
But it’s less about pandering to the banks than it is about keeping the City of London as the financial epicenter of Europe. Plans are being drawn up by many top-level banks to break away from London after May signaled on Tuesday, 17 January that she’s planning to initiate a hard Brexit as soon as possible. Major banks like HSBC Holdings PLC and JPMorgan Chase & Company are anticipating staff movements from the City of London to other parts of Europe. A shift in the balance of financial power will prove devastating to the United Kingdom. Even the UK’s premier mortgage lending bank – Lloyds Banking Group PLC – is likely going to be moving to Germany to guarantee its relationships with the European Union. May was unequivocal in her support for banks and other financial institutions operating in the United Kingdom. She gave her strongest vote of confidence yet to this sector: ‘… Financial services are of huge value to the British economy… And of course the services that fit around the banks, asset management companies and insurance companies, are important to us too.’
Investors Await ‘May Day’ for Brexit
The Prime Minister wants the United Kingdom to take the initiative at the World Economic Forum in Davos, Switzerland. In 2015, a total of 44% of all goods and services manufactured in the United Kingdom were exported to the European Union. Exports amounted to £133.5 billion, while imports amounted to £223.0 billion. Services accounted for £68 billion in imports and £88.9 billion exports. The Germans are deeply skeptical of the UK’s fiscal policies post-Brexit. The UK has several tools at its disposal to encourage investment in the country, such as low corporate taxes. However, the German Finance Minister stressed how international agreements would apply pressure on Britain to avoid such a policy. May encouraged investor optimism by appealing to the corporate sector with her talk of free enterprise, free trade, and offers of government assistance if necessary.