This Commons Library briefing paper brings together responses from financial organisations about the impact of the vote to leave the EU,. The vote to leave the EU has significant implications for the financial services sector, an economic sector which is critical to the UK economy. The degree of inter-linkage between the ‘City’ and the EU economies is substantial economically speaking and intricate in terms of the legislative interface.Jump to full report >>
Financial Services are of especial importance to the UK economy. The vote to leave the EU has significant implications for the financial services sector. The degree of inter-linkage between the ‘City’ and the EU economies is substantial, economically speaking, and intricate in terms of the legislative interface.
There is little certainty over what will happen next and a gulf between what the industry wanted at the start of the process and what it looks as though it will achieve now is quite wide.
With respect to the regulatory framework, the Chief Executive of the FCA, Andrew Bailey, confirmed that whilst the FCA had set up an internal Brexit unit to deal with Brexit specific activity, its main work remained unchanged allthough some projects have been sidelined in order to generate resources for specific Brexit related work. Many FCA rules are derived from the EU, and the FCA would continue to enforce existing rules and work to implement ones that had been agreed, but which were not yet in place. For the Regulator therefore it was ‘business as usual’.
Along with many other industrial and commercial sectors the more considered reaction of the industry to any question is “it all depends”.
In the absence of any clear guidance on what the EU negotiations will lead to in terms of the treatment of services, commentators have largely been reduced to guessing what large institutions intend to do from their pre- vote statements and matching these to the permutations of different possible negotiation outcomes.
In a sector with different interests and priorities and with a wide range of possible outcomes, the possible number of outcomes is very high.
The debate and commentary has been largely framed around whether banks and other institutions would stay (in London) or go. Informing this choice has been two issues: timing and the likelihood of continued ‘passporting' or equivalence.
Despite one banking commentator saying that most banks had their “hands are quivering over the relocate button” currently, only one bank and the European Banking Authority have said that they are leaving, however, many institutions have set up European arms and transferred both staff and functions abroad, to ensure continuity of provision of service to European clients.
Commons Briefing papers CBP-7628
Author: Tim Edmonds