By Gokhan Kurtaran
LONDON
International financial institutions are increasingly examining possible scenarios if there is a U.K. exodus from the European Union, according to a senior London-based lawyer.
Shearman & Sterling senior manager Barnabas Reynolds said on Wednesday that many financial firms are expected to establish partnerships outside the U.K. if Britain votes to leave the EU.
David Cameron, the U.K. prime minister, has promised to hold an ‘in/out’ referendum in 2017 on the country’s membership of the European Union if his Conservative Party wins an outright majority at the next general election.
“It’s likely that they would establish a branch or subsidiary within the new Europe to do some elements of business, certainly retail and probably some other types of business, though many elements of the service could continue, behind the scenes, to be conducted from the U.K.,” Reynolds said.
Reynolds noted that in case of an exodus from the union, Ireland may become the first choice within a reduced EU for international financial giants.
“Where you would set up your European subsidiary or branch is Ireland; it is English-speaking and has a similar legal framework. It’s a relatively easy place to move to, albeit it has limited resources compared with London,” he said.
He claims that ostensibly limited financial resources in Ireland might prompt institutions to turn towards Frankfurt or Luxemburg.
Stressing that a true evaluation of the U.K.’s possible exit from the EU is “nearly impossible” for the moment, Reynolds says that a possible outcome of the exodus would be highly dependent on what steps the U.K. took next.
“If it leaves, the consequences will depend to a great degree on what the U.K. does next. If it reduces taxes and becomes more competitive it could potentially benefit,” he said.
Currently, the U.K. is the largest leading net exporter in financial services with approximately US$106 billion net surplus each year, according to International Money Fund figures.
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