The IT impact of Brexit On the Finance Industry
Although a lot of uncertainty still surrounds Brexit, few would argue the UK’s dominance of Europe’s financial services market will be diminished. This shift will inevitably create a period of instability where companies will be looking to cut their costs to reflect their decreasing revenue.
When a single sector accounts for 11.5% of the UK’s total tax revenue, enjoys a trade surplus in excess of £70 billion, and generates more than 2 million jobs both within the sector or within associated professional sectors, the importance of minimising the impact is only too apparent.
What Will Happen?
When it comes to Brexit a lot of companies are being left guessing. No strategic IT solutions, which may fail under the impact of Brexit, can be developed until we know what the regulatory changes are. Prudence dictates that while we can’t implement the necessary changes, we should implement the processes and systems that allow us to adapt to new regulations in the shortest possible time.
A Summary of key areas to consider include:
- The relocation of staff and potential for new regulatory requirements to move some data and IT elements to a country still within the EU
- The development of IT needed to conform with new statutory and regulatory requirements
- The potential for some existing UK based systems to need decommissioning
- The Urgent need for feasible interim and tactical solutions
- Likely talent migration to the EU causing a loss of operational knowledge and staff shortages
- The remapping of global hierarchical and static data, the backbone of all reporting
- The implementation of new entities and accounting systems
For many companies the necessary reaction will require a fundamental change to their organisational structure. With such a big task ahead the firms that are proactive will have a big advantage.
As other financial sectors grow throughout Europe it’s inevitable they will take business away from London. This reduction in revenue will need to be met by a reduction in operating costs. Most companies will achieve this by transforming their IT ecosystem focusing more heavily on automation, efficiency and connectivity.
With over 40 years of EU regulations to be incorporated into UK law, along with any potential renegotiations or trade deals, the scope for regulatory change is huge. The key to ensuring continued success will be the ability for your IT infrastructure to adapt quickly to changes, including new requirements in regulatory and statutory accounting and reporting. Depending on the prevailing regulatory changes, and the curtailing of ‘passporting’, we could also see the need to house data in an appropriate region still within the EU.
Free movement within the EU will make one of the newer financial hubs an easier option for talent already located in Europe. Also expect to see some existing talent migrating to within the single market. The new environment will potentially make London less appealing as a career choice, and leave some firms with costly staffing problems. Some of this can be negated by automation and increased efficiency. Being aware of the problem means firms can take preemptive steps to insulate themselves as much as possible. Despite taking precautionary measures we still expect there’ll be a lot of local and operational technical knowledge lost.
What Do We Know?
In the absence of hard facts financial institutions need to take a tactical and flexible approach. The changes needed are going to cost, while at the same time creating risk and fragility. Mitigating as much of the impact as possible is a move any sensible company will make.
For market leading solutions that drive effective change contact 4FRONT. Our invaluable range of experience and vast knowledge are your key to increasing efficiency and reducing costs. Our tactical approach will factor in all the flexibility you’re going to need to weather the coming uncertainty.