Lloyd's of London chairman John Nelson said last year the iconic insurance market would have to move part of its business out of the UK if it was not given guarantees about access to European markets.
Those guarantees could not be made, so a move has now been confirmed.
It’s important to note that the amount of business Lloyd’s is transferring to Brussels is very small; staff numbers will be “in the tens.” This decision is far from a disaster for the City, but it does serve as a warning for the government as the UK heads into Brexit negotiations.
As the City of London’s policy chief, Mark Boleat, said yesterday – Brexit will lead to a loss of some business. That’s just the new reality. The mood music in Europe currently suggests there’s very little appetite for a special deal on financial services.
While the Prime Minister called for a “bold and ambitious” free trade agreement between the UK and European Union, the European Parliament has set out its opposition to agreements that would grant “any privileged access to the Single Market for UK based financial institutions”.
There’s also an almighty row playing out over whether the terms of a new deal can be discussed before the UK’s departure from the EU. Brexit minister David Davis said yesterday he was confident a trade deal could be hammered out alongside a Brexit agreement, but certain sectors of the City need concrete assurances.
A lack thereof is precisely what prompted Lloyd’s to create a new EU hub. As Lloyd’s, Royal London and JP Morgan (to name just a few of the other companies taking similar action) have demonstrated, businesses can’t afford to wait to make decisions about where to operate while politicians kick the problem further down the road. In this case, time really is money.
The issues around trade must be addressed quickly and with clarity. The trickle of departures to elsewhere in Europe is highly unlikely to turn into a deluge, but the government cannot be complacent and the City cannot rest on its historic strengths.
While Lloyd’s may only be moving a fraction of its operation to Brussels, hundreds of firms doing the same would have a very noticeable impact – not least on Treasury revenues.