Brexit. Whatever your perspective on it, one thing is for sure: the United Kingdom (UK) is experiencing a period of unprecedented economic and political risk. It is a challenging time for organisations that must consider how to keep their business operating once the UK leaves the European Union (EU) and make strategic decisions and investments in a highly uncertain environment.

DXC Technology and Brexit Partners, a group of specialist advisers from the public and private sector, recently held an executive round-table with senior clients and expert commentators to discuss the potential implications of Brexit on the banking and capital markets sector. The discussion explored the concerns banks have, how banks are preparing for the potential Brexit scenarios and the major challenges they face. Potential opportunities were also explored.

The past 10 years after the 2008 recession haven’t been smooth sailing for the banking industry. Banks have had to operate in an environment of low interest rates, an ever-increasing regulatory burden and digital disruption. Moreover, banks have lost the trust of consumers and society. Consequently many banks have struggled to grow and have embarked on cost-cutting and transformation programmes. For banks and financial institutions operating in the UK, Brexit adds a further level of complexity and uncertainty to the mix.

Unsurprisingly, the main question in our round-table discussions was: What will Brexit look like? Banks are asking for clarity and guidance to shape their own Brexit programmes. Crucial issues arise, such as job uncertainty and potential loss of investment. Despite not knowing the Brexit outcome, banks are starting to move people (i.e., jobs) and assets out of the UK to other European countries. In the same way that the UK and EU countries have been discussing how to keep the planes flying post Brexit, financial institutions are thinking about how to maintain liquidity and to ensure that networks such as cross-border payments continue to function.

And, how will it all affect the City of London, one of the world’s most powerful financial capitals? Although the financial media are buzzing about Brexit, there is still high confidence for the future of the city, as its capacity, liquidity and skill-sets are difficult, if not impossible, to replicate elsewhere. And London with its Greenwich Mean Time (GMT) zone is the bridge between the Asian markets and New York.

Regulation and regulatory stance were another hot topic, both in the UK and in the EU. Regulations such as GDPR have already made banks change and invest heavily in the way they collect, communicate, manage, store and ultimately delete data. With Brexit looming, banks are now revisiting issues such as where data is stored, how it’s secured and where to locate data centres.

There are many concerns, but there is also a glimpse of optimism about new opportunities. Some feel that if — post-Brexit — any regulator chooses to adopt a more relaxed stance, that would encourage financial institutions to innovate more, as long as they can earn the trust of customers.

So, what could the future hold once the dust settles? My view is that UK banking is so globally interconnected that it must remain so, and everyday transactions will continue to be initiated and settled by people and systems distributed across borders. Depending on what the UK landscape looks like post-Brexit, we will see a change in the mix of where banks choose to conduct certain operations, but the gravitational pull of the City of London will remain strong.

Perhaps the biggest impact will be one driven by technology. Automation and digitalisation make work location-independent. I feel there’ll be an acceleration of the significant investments banks are making in this area — so they’ll be less reliant on employing people in specific locations. Moving processes out of location-dependent legacy systems to the cloud will have a similar effect. Banking will become more and more virtual, and more flexible both in organisational terms and for consumers.

I also believe we will see more innovation as both the City of London and the financial centres in Dublin, Frankfurt and Paris look to find new niches and opportunities for expansion in the post-Brexit landscape, against the backdrop of rising competition from Asia. And if the UK chooses a lighter stance on regulation, we may even see a “black swan” event, where a significant new entrant totally shakes up the industry.

If you would like to continue the discussion on the challenges Brexit poses for the banking and capital markets, connect with me via my LinkedIn profile and discuss with us in our THRIVE LinkedIn group.