London's financial bosses urged the U.K. government to consider extending Brexit negotiations to a five-year transitional process in order for Britain to avoid a systemic economic meltdown.
The chief executive of the London Stock Exchange (LSE) and HSBC chairman renewed calls for the U.K. government to clarify its future relationship with the European Union (EU) in a meeting with MPs at the Treasury select committee on Tuesday.
U.K. Prime Minister Theresa May has pledged to start formal divorce procedures from the EU by the end of March. However, LSE Chief Executive Xavier Rolet projected that a two-year negotiation process would be "too short" and therefore insufficient in protecting the country's financial industry.
"The economic system (in London) is like a Jenga tower… you don't know what will happen if you pull pieces out," Douglas Flint, HSBC chairman, told MPs on Tuesday.
"There are two risks to jobs. One is we move the jobs, the other is the jobs are simply eliminated because the market opportunity (in Europe) is unattractive," he added.
Mark Carney, Bank of England governor, said that he agreed with Douglas Flint's "Jenga tower" description regarding the precarious position of London's economic system with Brexit on the horizon.
"I think that the financial stability risks around that process are greater on the continent than they are for the UK," Carney said.
"I'm not saying there are not financial stability risks to the UK, and there are economic risks to the UK. But there are greater financial stability risks on the continent in the short term, for the transition, than there are for the UK."
'Pre-emptive action'
HSBC, Europe's largest bank, had reportedly been considering moving 1000 jobs to Paris in the event passporting rights for the British financial sector could not be guaranteed post-Brexit.
Flint reaffirmed to MPs attending the committee that the U.K. based lender would regard France as the most attractive European destination. Given HSBC has integrated services in Paris he suggested the bank could even consider taking "pre-emptive action" to relocate some of its operations.
LSE boss Rolet also cited an EY study to MPs which projected 232,000 jobs could be lost from the U.K. if euro-denominated clearing is forced out of the country. Rolet stressed London was in danger of losing its global leadership title and added that New York would be best placed to reap the benefits of any derivative clearing too.
Rolet and Flint told the committee that a five-year transitional period, after Article 50 had been invoked, would enable London's businesses to maintain stability.
May suggested in December that there was a case for an "implementation phase" to allow businesses to adapt to the demands of the U.K.'s departure from the EU.
"Without a clear path to continued operation of our global businesses our customers simply would not wait," Rolet said.