Bankers predict Brexit will increase compliance costs
It’s been more than five months since the EU Referendum vote, and many people may argue that not a lot has changed since the British public decided on Brexit.
Most organisations are taking a ‘business as usual’ approach to the news until the government is able to provide firmer details on how the UK’s exit from the EU will look.
The High Court has already ruled that Parliament will need to vote before the government can trigger Article 50, but an impending appeal means the matter is set to go before the Supreme Court in December.
In an unusual move, 11 Supreme Court justices will hear the case, and some experts have predicted the government could lose the appeal 11-0. Clearly, there could still be many twists and turns ahead for the Brexit campaign.
However, in the meantime, bankers are operating on the premise that the UK will leave the EU, and a recent survey from Synechron indicated how they feel the finance industry and compliance needs will change as a result.
Increased compliance costs and red tape
Despite the potential for huge regulatory overhauls, 75 per cent of bankers are confident that London will still be the financial services capital of Europe in five years’ time.
Nevertheless, respondents did recognise the knock-on effect Brexit is likely to have for compliance departments across the City. In fact, 56 per cent said compliance costs and red tape would increase, while none of the executives polled believed regulatory costs would fall.
The results contradict the prevailing argument that Brexit would lift the regulatory burden on the financial services sector.
“Banks are no longer waiting for the government to trigger Article 50 and have begun setting up steering committees to plan for life outside the EU, with some already considering relocating staff to other cities around Europe,” said Tim Cuddeford, managing director at Synechron Business Consulting.
“While Brexit poses an unforeseen challenge for financial institutions, the prospect of rising compliance and huge relocation costs appear inevitable.”
According to the organisation’s estimates, businesses would need to spend £50,000 on average per employee that they relocate to a new European location.
How will Brexit affect compliance professionals?
The simple answer to this question is that we don’t know – yet. Until more details are released regarding the likely path Brexit will take, many businesses will be in the dark about how their compliance departments must adjust to meet the changes.
Specifically, bankers will be keen to find out what existing trade model the UK is likely to adopt once Article 50 is triggered or whether the country will negotiate a completely new arrangement.
A recent whitepaper from Arachnys suggested that some compliance teams may be moved abroad, but demand could climb for UK-based professionals with the skills and experience to cope with a new, more complex regulatory environment.
The company noted that highly qualified compliance staff are already difficult to find, and some companies are struggling to secure the best candidates. This aligns with our research, which highlighted earlier this year that 79 per cent of hiring managers were having difficulties recruiting talented compliance staff.
Two-thirds of compliance departments said their teams were insufficiently resourced – a figure that could rise as businesses begin feeling the additional burden of new regulations if Brexit goes ahead as planned.
Leaving the EU may be some way off for the UK, but savvy financial institutions will be looking to prepare for the changes as quickly as possible by strengthening their compliance teams now.
To view our current compliance vacancies, please click here.
Our 2016 Compensation and Market Trends Report combines our review of the prevailing conditions in the compliance recruitment market with the results of our latest employer survey.
Image: Bee-individual via iStock