UK Insurers & Banks Make Contingency Plans for ‘Hard Brexit’: BofE’s Carney

Banks based in Britain may start to relocate activities to other countries about 1-1/2 years before a British departure from the European Union if a “hard Brexit” looks likely, Bank of England Governor Mark Carney said on Tuesday.

If the government begins the divorce process in March as promised, that could mean banks start moving in late 2017.

Carney told lawmakers that banks and insurers were making contingency plans in case Britain loses a lot of its access to the EU’s single market but said it would be “precipitous” for them to take final decisions now about what Brexit will mean.

“If the time to exit is measured in 18 months or less and the degree of exit is viewed as considerable then a number of those firms would take decisions, that’s the best guidance I can give,” Carney said.

His comments came as the European Central Bank’s banking supervisor Sabine Lautenschlaeger said queries from banks considering relocating some operations from Britain to the euro zone were rising.

Prime Minister Theresa May has said she wants to begin the two-year process for negotiating Britain’s exit from the EU by end-March, although that schedule might be delayed by a court decision that parliament should approve the launch of talks.

The government’s likely stance in talks – particularly how it will balance a desire to curb immigration with retaining access to the single market – remains unclear.

Some large banks which use London to run their EU operations have said they could start moving staff as early as 2017 if there is no clarity on whether Britain will have single market access.

On Monday, Germany’s finance ministry said it is fielding an increasing number of information requests from financial institutions in Britain considering a move to Germany since the UK’s decision to leave the EU.

(Reporting by David Milliken and UK bureau; writing by William Schomberg; editing by Catherine Evans)