The banking sector needs to think quick to swerve some of the more negative effects of June's Brexit vote, a report out today suggests.
The study by the Boston Consulting Group (BCG) warns that, not only will the worsened economic outlook take its toll on banking sector performance, banks need to be preparing for action now, rather than being too cautious with a wait and see approach.
"Given the high level of uncertainty that is likely to prevail for some time, banks must immediately assess their strategic options and operating models, develop contingency plans and, where appropriate, begin moves to mitigate uncertainty and risk," the report read. "It's time to prepare for the consequences – but also to think about how to take advantage of the situation and capitalise on any opportunities that may arise."
In contrast to BCG's research, a recent survey by EY found London's investment banks were holding fire on making any major decisions following the referendum, while only three per cent of the largest financial services firms with UK operations have publicly stated they may move work overseas.
Omar Ali, UK financial services leader at EY, told City A.M.:
In reality, while businesses are considering their options for certain elements of their operations, there isn’t one location that is the logical alternative to London or one single location that has capacity to absorb the City and so for now the majority are continuing with prepare but wait and see approach with a continued focus on serving their clients.
Across financial services work continues on the contingency and scenario plans that had been drawn up in advance of the referendum, and in particular preparing for the second order consequences of the referendum notably a slowing economy and the potential of lower interest rates for longer.
Ratings agency Standard & Poor's indicated last month that its faith in the banking sector had been rocked by the Brexit vote, downgrading the outlook for UK six banks – Barclays, Clydesdale, HSBC, Lloyds, Santander UK and Nationwide Building Society – to negative.
There has also been some concern the UK may not gain favourable passporting rights as part of its Brexit deal, which would hamper access to the Single Market for the financial services sector.
Such fears lead HSBC to reveal back in February that it might shift as many as 1,000 jobs over to Paris should the UK fail to seal a good deal. A few weeks before the referendum, JP Morgan chief executive Jamie Dimon voiced similar concerns.