The UK-EU relationship in financial services

Summary:

The UK financial services sector is of vital importance to the UK economy as a whole, employing 2.3 million people and making up 10% of total UK tax receipts. Though traditionally closely associated with the City of London, the sector is well-established across the UK; two thirds of employment in the sector is outside London. The sector is also an important contributor to the UK’s international trade, comprising 19.1% of all UK services exports.

The EU is an important trading partner in this sector, making up 37% of total UK financial services exports in 2019. The post-Brexit UK-EU Trade and Cooperation Agreement (TCA) contained few provisions for trade in Financial Services, but this had long been anticipated and prepared for. Financial services jobs have moved from the United Kingdom to the European Union as a result of Brexit, but in far smaller numbers than some expected; current estimates suggest 7,000 jobs have moved, compared to estimates of 75,000 in 2016. Nevertheless, the Committee warns against complacency in this regard, as it is not yet clear whether the impact of Brexit on employment has fully played out.

While acknowledging the challenges that Brexit has presented for the sector, witnesses the Committee spoke to were largely optimistic in their outlook. London has retained its position as the world’s second largest (or most important) financial centre and the most important in Europe, and there was a strong sense among the witnesses we spoke to that the sector has retained its resilience. However, the Government must ensure that its approach to financial services delivers for the whole country and the whole economy as well as the City of London.

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