A number of top banks have begun planning to leave the UK as the fallout from Brexit continues. In what would be a calamity for the British financial services sector, some small banks could move as soon as this year with some of the larger international banks moving in the first-quarter of 2017.

"Most international banks now have project teams working out which operations they need to move to ensure they can continue serving customers, the date by which this must happen, and how best to do it," wrote Anthony Browne, chief executive of the British Bankers’ Association, in an Op-Ed for The Guardian. He wrote, “Their hands are quivering over the relocate button. Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year." (See also, New York May Be Brexit's Big Winner)

Many major banks are based in London as it gives them access to the 28-country European Union via what is known as "passporting." Passporting allows banks in one of the member states to do business across the entire bloc without having to obtain a specific license, something the banks are beginning to fear they may lose as the Brexit negotiations begin. Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) both have their European headquarters in London with satellite offices throughout Europe.

UK Prime Minister Theresa May has said she will trigger Article-50 - the process of the U.K. leaving the EU - before March 2017 and begin negotiations related to remaining part of the EU single market for financial services, the UK's biggest export by far. "Banking is probably more affected by Brexit than any other sector of the economy, both in the degree of impact and the scale of the implications," said Browne. 

However, with the duration for the "divorce process" set at two years and the free movement of services arguably the biggest chip on the table, banks are not willing to run the risk and hope that May and the U.K. government can strike a deal. Prior to the Brexit vote, JPMorgan Chase & Co (JPM) warned that if the U.K. left the EU it would face up to four-thousand job losses as the ability to passport would be forgone. (See also: Dimon Warns Brexit would Force JPM to Cut 4K Jobs)

With the stakes high, Browne warned that if a deal cannot be struck, it will be all of Europe that loses out. "Putting up barriers to the trade in financial services across the Channel will make us all worse off, not just in the UK but in mainland Europe," he said.