How the UK’s financial services sector can continue thriving after Brexit

Author (Person) ,
Publication Date October 2016
ISBN 978-1-907668-50-0
Content Type

The reality is that the significance of the financial services passport depends on the industry. It is important to business in some sectors, but has much less value in others. Therefore, to claim that the success of the UK as a global financial centre is entirely reliant on the passport is exaggerated. This is not to mention the other reasons why London has become a successful hub – infrastructure, language, time zone, ability to attract the best talent, legal system, and so forth.

In the upcoming negotiations with the EU, the Government needs to focus its efforts on retaining or replicating a passport-like relationship in those sectors where it is most valuable.

In order to secure some form of bespoke arrangements, the UK will need to convince the EU-27 that keeping financial markets open across the Channel is a matter of mutual interest. Ultimately, fragmenting London’s financial ecosystem would lead to higher costs for everyone involved – including for EU-based consumers, corporates and governments. Furthermore, the passport is a two-way street. A number of large EU banks make significant proportions of the revenue in London – Deutsche Bank, for instance, gets 19% of its revenue in the UK.

Crucially, it is not obvious that business moving out of the UK would relocate to another European hub: New York, Singapore or Hong Kong would be just as well, if not better, placed to reap the benefits – meaning Europe as a whole could end up worse off.

This kind of ‘lose-lose’ scenario should be in everyone’s interest to avoid.

This comprehensive, independent assessment unpicks the true value of the EU financial services ‘passport’ and considers what alternative arrangements the UK should pursue as part of the upcoming Brexit talks with the EU-27.

The report is based on conversations with practitioners and trade associations, to assess the true value of the EU financial services passport – the ability to sell services across the single market from a UK base – across various sectors within the industry.

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Related Links
Blog: Open Europe, 17.10.16: How to ensure UK and European financial services continue to thrive after Brexit
ESO: Background information: UK prepares to protect its golden goose in EU talks / 5,500 UK-based finance firms could lose EU ‘passporting’ rights
ESO: In Focus: Brexit - The United Kingdom and the European Union
ESO: Background information: The impact of the UK's exit from the EU on the UK-based financial services sector
Leave Alliance: Monograph, No.14, October 2016: Financial Services and Brexit
CAPX, 18.10.16: Here’s how the City can get its European passport
Blog: Open Europe, 19.10.16: Understanding regulatory equivalence – an effective fall-back option for UK financial services after Brexit?
Intereconomics, Vol.51, No.5, September-October 2016: EU Financial Market Access After Brexit
Blog: Open Europe, 21.10.16: Praise for Open Europe’s new report showing the true value of the financial services passport
Blog: Open Europe, 26.10.16: How important is ‘passporting’ to the City of London?

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