Brexit has major implications for companies carrying out regulated activities in the banking, finance and insurance sectors. Loss of EU member state status will remove UK-based operations from the European passporting system which allows regulated entities in one EU state to freely offer products and services across Europe.
Over the past three years, some UK-based businesses have already moved part or all of their operations to other EU jurisdictions, particularly those with key strategic financial and commercial centres. Brexit is also forcing continental European players to look carefully at reorganising their arrangements for continuing to do business in the UK, in some cases by establishing UK-regulated subsidiaries dedicated to serving the local market.
France, Germany, Luxembourg, Belgium and Ireland have emerged as the most likely Brexodus destinations for banking, finance and insurance companies. Recent changes in employment regulations reflect competition to attract UK businesses. In France, a major reform of employment law includes specific measures to attract foreign executives and changes to regulations for the banking sector. Germany is proving to be popular among relocating banks and their employees, as it offers ready accessibility for UK commuters and includes strong protection against dismissal. Luxembourg has introduced financial incentives targeting highly skilled and qualified workers, alongside tax breaks including tax exemption for relocation costs that benefit both employers and employees.