Some financial services firms might relocate to EU in wake of Brexit vote: British central bank governor

The governor of the British central bank the Bank of England (BOE) said on Tuesday if Britain quits the European Union (EU), some financial services firms might relocate from Britain to within the EU.

BOE governor Mark Carney told a meeting of the Treasury Select Committee (a parliamentary committee with oversight of economic policy) that a Brexit vote could see international financial institutions with a significant presence in Britain move some of their operations to an EU country.

Carney said: "One would expect some activity to move. Certainly, there is a logic to that. There are views that have been expressed publicly and privately by a number of institutions that they would look at it. I would say a number of institutions are contingency planning for that possibility - major institutions, foreign headquartered, which have their European headquarters here."

Stuart Gulliver, the chief executive of the bank HSBC, said in the middle of February that his bank could move 20 percent of its 5,000 person workforce at its headquarters in Britain to Paris in the event of a Brexit vote, and Morgan Stanley's chief executive Colm Kelleher, said in November that a Brexit vote would trigger "a significant backlash against Britain as a financial center".

Carney added in his address to the committee that a Brexit vote in the referendum scheduled for June 23 could affect the prospects for inflation.

"There could be lower levels of activity because of the degree of uncertainty that could affect investment and household spending. On the converse, there could be movements in the exchange rate which would push up on inflation through normal exchange-rate pass-through, and the bank would have to take an assessment of those forces and their likely persistence," he said.

Carney's comments give no indication of the direction of the BOE's interest rate policy, according to analysts.

The rate set by the BOE's Monetary Policy Committee (MPC) has been at a record low of 0.5 percent since March 2009, and many analysts expect no move up or down this year.

Vicky Redwood, chief UK economist at Capital Economics, an economics research company in London, commented in a note on Carney's comments: "There was no clear steer on what direction interest rates would move after a Brexit - supporting our view that the MPC would not be panicked into either cutting or raising rates." Endit