Local
articles | 29 June 2016

Cyprus and UK financial firms after Brexit

Bank of Cyprus’ vice chairman, Wilbur Ross, said recently that Cypriot authorities should try to compete with Ireland and Frankfurt in attracting London-based financial companies, which will seek to relocate following the Brexit vote.

“I recommend that Cyprus should adopt and immediately announce even more liberal financial service policies than it already has so that it can try to take advantage of the inevitable relocations that will occur during this period of confusion,” said Ross, who led a group of investors that participated in Bank of Cyprus’ capital increase in August 2014.

“Otherwise, just Ireland and Frankfurt will be likely the main beneficiaries. The biggest problem for everyone will be at least two years of uncertainty” and market volatility, creating opportunities that will follow once the UK triggers Article 50 of the EU Treaty allowing its withdrawal negotiations to commence.

It is a “God-given opportunity but a brief one,” said Ross who was addressing an audience in Nicosia that included Finance Minister Harris Georgiades and Under Secretary to the President Constantinos Petrides.

The Guardian reported on Monday that up to 100,000 jobs in London’s financial sector may move to other EU countries by 2020 following the Brexit referendum.

Ross said that Transport Minister Marios Demetriades informed him about Cyprus’ success in attracting shipping companies from the UK to Cyprus.

While standards of living across the world are “at an all-time high,” there is anger among voters because of inequality, immigration and excessive government, he said. “Extremist candidates in the EU, Brexit, Donald Trump and Bernie Sanders are the responders,” he continued.

Brexit, decided in a referendum on Thursday when 52% of British voters said they wanted their country to leave the EU, “will be the most expensive and probably the most bitter divorce case in the history of the world,” said the US billionaire who is famous for investing in troubled industries. In 2014, he made a profit from investing in, reorganising and selling his stake in Bank of Ireland.

The outcome of the referendum triggered panic in global markets, caused a strong depreciation of the pound and prompted Premier David Cameron who supported the Remain campaign to announce his resignation. On Tuesday, labour deputies supported a no-confidence motion against their party leader Jeremy Corbyn whom they accused of not doing enough to avert Brexit.

Two years after a referendum over Scottish independence, “Scotland may defect to the EU,” Ross said. “Northern Ireland may merge into the Republic of Ireland and leave the UK. Spain may finally take over Gibraltar”.

“The EU may lose £7.7bn (€9.3bn) in revenue that it gets now from the UK, (which is) 6% of its total budget,” Ross said. “Hopefully, they won’t ask Cyprus for a too bigger share than the difference”.

The same time, bilateral trade may be disrupted which may put the EU’s trade surplus with the UK, which sends 45% of its exports to the EU, at risk, Ross said. In addition, 87% of the UK’s economy which are financial and other services, which he described as the UK’s “main economic mainstay,” could also lose their “automatic passport to the EU”.

“Financial services themselves are 8% of the UK’s gross value added, 3.4% of its jobs and £21bn of its taxes,” Ross said. “The residency of the 1.2 million UK citizens living in the EU, maybe at risk”.

Source: Cyprus Mail

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