TheCityUK: Brexit Risks Damaging UK Financial Services, Threatening Jobs And Growth

With the countdown to the EU referendum now underway, a new report released today by TheCityUK shows that while leaving the EU may not be ruinous for the UK economy, a Brexit risks damaging UK-based financial and related professional services through uncertainty, reduced market access and a loss of influence over trading conditions. This would threaten the overall competitiveness of the UK as a place to do business and as a destination for talent and enterprise.

According to the report – ‘A practitioner’s guide to Brexit – exploring its consequences and alternatives to EU membership’ – of the alternative EU relationship scenarios analysed, none offer full access to the major benefits currently enjoyed by the UK as a member of the EU. While a bespoke UK agreement is feasible, its possible content is uncertain, leaving open how it would address key business issues in practical terms. Negotiating any new agreement with the EU would take a considerable period of time.

Chris Cummings, Chief Executive, TheCityUK, said, “Access to the EU’s Single Market has helped to reinforce London’s position as the world’s leading international financial centre.  Major firms from around the globe come to London as the gateway to the Single Market – but that position is dependent on the legal freedoms made available by the Treaties and Single Market legislation. That is why membership of a reformed EU makes sense as it secures continuing investment in the UK, creating jobs and spurring economic growth. 

“A potential Brexit raises questions for firms’ business strategy, location and investment decisions. If the UK were to leave the EU there would be a prolonged period of uncertainty while the terms of any new trade deal were negotiated.  This would be seized upon by our competitors who would be quick to try to snap-up the investment that would normally come to the UK.”

In considering the practical implications of a potential Brexit, TheCityUK’s report analyses the challenges to be faced in concluding new trade agreements with other countries. While there could be opportunities for UK negotiators to focus on sectors where the UK has inherent strengths, such as financial and related professional services, the scope, cost and resourcing requirements to actually negotiate new agreements are daunting. The timescale and ability to secure new trade deals would be dependent on not only the UK’s priorities and resources, but also on the priorities and goodwill of the other countries concerned.

Mr Cummings said, “June 23 will be a once-in-a-generation event. While it is not the place of business to tell people how to vote, we have an important role to play in presenting the facts and explaining the consequences of the referendum outcomes so that they can reach an informed decision. As an industry that employs over 2.2 million people right across the country and contributes more tax than any other sector, we will and must play our role.”

Background

The table below is taken directly from the report. It is not an exhaustive list of the alternative scenarios that have been discussed to date and excludes, for example, the option of reinvigorating the Commonwealth[1] which would face substantial challenges.

[2] A bespoke solution might perhaps include a combination of elements from the different scenarios set out in the table above, plus other features such as a more advanced form of passporting rights than available under the EFTA and EEA options; but its precise content would be subject to negotiation with the rest of the EU and is inevitably speculative.

* Dependent on the outcomes of the negotiations