Group 20 – After Brexit: Europe Takes All

Source: les Échos

First of all, we propose you to look at a a very small video in order to better understand the Brexit.


As seen in the article “HSBC ‘plans to move 1,000 jobs to Paris’ due to Brexit“ from the English newspaper ‘The Independent”, France could receive hundreds of jobs seeping out from Britain, as the economic climate is significantly more volatile because of the Brexit vote. HSBC is currently following a relocation strategy, as its London headquarters are no longer suitable to pursue their goals and objectives. Indeed, HSBC is without any doubt one of the most globalized bank, strongly relying on good and stable international agreements which is the opposite of the UK independence and new wave of protectionism.

 

HSBC chief executive Stuart Gulliver also said trading operations that generate about 20 per cent of revenue for the lender’s investment bank in London may move to Paris, as this one fifth may be affected by the loss of EU passporting rights.

Articles

It is also possible that UK could leave the EU but remain a part of the European Economic Area (EEA), in a model similar to that of Norway, Iceland and Liechtenstein.

Employees at HSBC in Canary Wharf, who already process payments made in Euros, would join the 10,000 workers currently based in the French capital under the plans.

A number of other large financial companies including Morgan Stanley, BNP Paribas and JPMorgan have also reportedly made plans to reduce the size of their businesses in the UK, following the referendum result in June.

HSBC currently employs around 48,000 people in the UK, and around 260,000 across the world.

This decision is a direct response to HSBC’s low performances in the first semester following the Brexit vote. Indeed, it’s revenue have decreased by 11% and it’s benefits shrinked by 29% compared to last year results. This is due to a withdrawal of capital by worried investors, as there is a risk of recession due to the current unstable economic climate taking place in the UK.

Source/Full article: http://www.independent.co.uk/news/uk/home-news/brexit-hsbc-economy-banks-eu-referendum-latest-jobs-single-market-effects-a7104351.html

http://www.independent.co.uk/news/uk/home-news/brexit-hsbc-economy-banks-eu-referendum-latest-jobs-single-market-effects-a7104351.htmlhttp://www.independent.co.uk/news/business/news/brexit-latest-news-hsbc-bank-move-20-per-cent-fifth-london-banking-operations-paris-chief-executive-a7532711.html

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HSBC said the « main near-term economic impact to be elevated uncertainty. » This will hit spending by businesses and individuals and « the impact would likely be most keenly felt in investment, if firms delayed spending until more clarity emerged about the UK’s post-EU arrangements. » As a result, the bank estimates that gross-domestic-product growth will be 1% to 1.5% lower in 2017 than it would have been otherwise.

 

 

Source:

 http://www.rfi.fr/economie/20160803-hsbc-affectee-benefice-net-plonger-brexit-chine-restructuration

http://uk.businessinsider.com/hsbc-what-happens-day-after-britain-votes-leave-brexit-eu-referendum-2016-6?r=DE&IR=T

Prudential CEO, Mike Wells, who has maintained that UK should remain in Europe, has said that a EU exit “would be possible”. He noted that the company generates 87% of its business outside the EU, and said the impact of a Brexit vote in the June referendum would be “manageable”. The group’s investment arm, M&G, would be most affected should Britain leave the EU. “The infrastructure for its distribution is set up in Europe, and an exit from the EU could affect that materially,” Wells said.

Prudential has so far contributed to a record selloff in insurers in London trading.

The insurance giant has stated in August that it may transfer more funds from its asset management arm in London to Luxembourg or Dublin. These transfers will be made in order to maintain access to the EU’s single market after Britain chose to leave the union at the end of June. The new head of Prudential’s M&G fund management arm, Anne Richards has said that a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”

Like other British insurers, Prudential experienced volatility in its share price due to the uncertainty caused by the EU referendum. Fortunately, strong growth in Asia is helping offset lower profits in Europe. Prudential’s profits rose 15% to £743m in Asia, 9% to £642m in the US and 8% to £473m in the UK. Overall, group profits increased 6% to £2.1bn, beating analysts’ forecasts of £1.8bn.

Sources used:

https://www.theguardian.com/business/2016/mar/09/eu-exit-manageable-prudential-boss-mike-wells

https://www.bloomberg.com/news/articles/2016-06-24/european-banks-plunge-as-brexit-sparks-global-financial-turmoil

http://www.insurancebusinessmag.com/uk/news/breaking-news/prudential-may-move-parts-of-business-postbrexit-36378.aspx

https://www.theguardian.com/business/2016/aug/10/prudential-may-relocate-m-and-g-funds-brexit-vote

 


The section bellow is a counter- argument to the rest of our research: Read it, you may be surprised !🗿

 

It is interesting to notice that despite the general panic atmosphere sizing the insurance or banking industries located in the UK, the situation does seem promising for some.

Indeed, according to an article published by the Telegraph, there is some belief that there would be more business opportunities in the EU for UK insurance companies Post-Brexit than in the Pre-Brexit.

This is because current EU regulations (called Solvency 2) are said to give a strong disadvantage to British firms compared to their continent rivals. British firms have to hold 2 to 3 times more capital, which in turn raise costs, therefore reducing their competitiveness.

Julian Adams, group regulatory director at Prudential says they need a regime that is appropriate to the UK, and hopes that once the UK is out of the EU, they could adopt rules that are suited to the national companies and their consumers.

Source: http://www.telegraph.co.uk/business/2017/01/25/british-insurers-will-competitive-brexit/

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