Financial system already braced for no-deal Brexit, warns UBS boss of Brexit pain as it plans for ‘worst-case’ scenario

Financial markets are already assuming Britain will crash out of the EU, a top European bank boss said on Monday.

In a key week for Brexit talks, UBS chief executive Sergio Ermotti said the bank has chosen Frankfurt to be its post-Brexit European Union hub and has made “worst-case” scenario plans.

Ermotti told Bloomberg: “The financial system is already operating on the assumption that there is no agreement,” between the UK and EU.

“Whatever is going to happen from now onwards, it’s not going to make the exercise less expensive.”

If other banks copy UBS, the long predicted drift of business away from the City could begin in earnest.

UBS reckons that it will have to spend more than $100 million (£76.4 million) on Brexit, including the cost of moving staff from London. EU regulators say that they expect banks to establish full-scale, stand-alone operations within the 27 remaining member states as soon as possible.

Ermotti said the impact of Britain’s decision to leave the EU has already been felt, with companies pulling back across the continent.

“It’s a complication that undermines the willingness to make investments,” he said. “In the UK and in general in Europe this has been something that has prevented people taking action and investing for the future.”

Until recently, fears of a City exodus appeared overblown. Many banks have pulled back from threats to move bankers overseas, with most experts expecting London to retain its status as a leading financial centre.

It did lose the top spot to New York last week however. Meanwhile, UBS rival Deutsche Bank is planning to shift billions in assets from London to Frankfurt. Deutsche, struggling to revamp its business under new chief executive Christian Sewing, is under pressure from regulators over the size of its UK operations.

It could move most of its €600 billion in London-based assets back to Germany. Sewing has pledged to keep a “significant” presence in London after Brexit. Deutsche has 8,000 London staff.

Last week Bank of England governor Mark Carney warned a chaotic “no deal” Brexit would see house prices crash by a third. That would put intense pressure on banks, risking another crash.

The Bank has run stress tests on major banks to check they could survive such a shock.