Latest
Recommended
Published: Fri, October 07, 2016
Economy | By Melissa Porter

'Hard Brexit' could cost UK finance firms 38 billion pounds


The team studied the impact in terms of jobs, tax and industry revenues and warned of the potential risks of a so-called "hard Brexit" in which the United Kingdom does not secure access to the single market.

The report, prepared by Oliver Wyman on behalf of TheCityUK lobby group, warns that nearly 70,000 jobs and £10 billion of tax revenue are at risk from a so-called hard Brexit.

About 35,000 jobs and £5bn of tax revenue per year could also be in jeopardy, the report calculated, while noting that the £205bn financial sector pays about £67bn in tax per year and employs more than 1m people.

The study is one of the first to outline the impact on financial services of Britain's vote in June to leave the EU.

The report, commissioned by TheCityUK and published by management consultancy Oliver Wyman, calculated that up to 50% of EU-related activity, which generates £20bn in revenue, could be at risk if Britain moves to a position post-Brexit where it does not have any regulatory equivalence and its relationship with the trading block is through World Trade Organistion rules.

The Oliver Wyman data, developed with input from TheCityUK's Senior Brexit Steering Committee, industry participants, and the major trade associations, presents two distinct scenarios. In this scenario, revenues are predicted to decline by up to £2BN (2% of total wholesale and global business), 4000 jobs would be at risk, and tax revenues would fall by less than £0.5BN per annum.

"Every organisation in every sector that is a significant employer and a significant contributor to UK GDP is entitled to have an influential seat at the table", said Anthony Belchambers, chairman of the Honorary Advisory Council of the Financial Services Negotiation Forum.

Chris Cummings, chief executive of trade body the Investment Association, responded to the report by stressing that beyond the United Kingdom financial sector's direct contribution, it also plays a key role in funding the growth of British businesses and helping millions of United Kingdom citizens to save for the long term.

These estimated figures could therefore be doubled if the knock-on impact to the whole financial services ecosystem is taken into account, which could result in the loss from the United Kingdom of activities that operate alongside those parts of the business that leave, the shifting of entire business units, or the closure of lines of business due to increased costs.

The report predicts that only 4,000 jobs and £2 billion in revenue would be at risk if Britain kept access to the single market.

For the future relationship between the United Kingdom and European Union for financial services to deliver mutual benefits to the United Kingdom and European Union, the report recommended adhering to global norms; retaining current access to worldwide markets; equivalence and grandfathering between the United Kingdom and the European Union; orderly transition agreements; and on-going regulatory collaboration. "The top priority for the industry is getting agreement on a transition arrangement to make sure there is an orderly process and no risk to financial stability".

Like this: