I read with real concern that the Leave campaign does not think that the “passporting” afforded by the EU is worth much to the City. “Such rubbish,” Vote Leave campaigner Andrea Leadsom called it recently. Her statement shows a tragic lack of understanding of what modern financial services need.
Thanks to the EU, a UK passport gives holders the right to travel, work, study and retire anywhere in the Union without the need for any additional permissions, visas or paperwork. Some 1.2m Brits do precisely that, illustrating just how much we value this right.
The same goes for British firms. Because of the EU Single Market, a whole host of UK-based businesses can use their base or office in the UK to trade all across the EU without the need for any additional permissions.
Through the services passport, a UK firm is allowed to provide its services across the EU’s 28 member states, as long as it has been given permission to do so in the UK. In other words, instead of access to 60m customers, UK services firms can instantly have access to 500m customers without any additional hassle or bureaucracy.
But the passport is only available to countries that are members of the EU’s Single Market. Leave this market and you will also lose the passport. That matters for at least three reasons.
First, around 5,700 UK-based firms, employing hundreds of thousands, make use of the passport. Forty per cent of international firms’ European HQs are in London (the next is Paris with 8 per cent). If the UK left the Single Market, these UK-based businesses would have to transfer operations to an existing subsidiary within the EU or open up a new subsidiary, which would mean added costs, hiring new staff, paying more taxes in the host country, and accepting all relevant local and EU rules. For the UK that would mean lost jobs and tax revenues.
For example, around a quarter of Lloyd’s insurance business is in Europe, so that company would face a tough choice. HSBC and JP Morgan have said they will be forced to cut 1,000 and 4,000 UK jobs respectively if the UK left the Single Market. If you think this will only impact a few bankers in London, consider this: around two-thirds of jobs in financial services are outside London, so any job losses would hit all regions.
Second, firms use the UK as an entry point to the Single Market. Almost 70 per cent of the investors in the UK link their decisions to invest here to access to the Single Market. Lose that access and investment will suffer.
And third, related to the above, it would be a blow for UK startups and smaller firms. The passport is the ultimate scaleup tool: 28 licenses for the price of one, giving you instant access to 500m consumers. In recent years, companies like Transferwise, founded five years ago with the aim of filling a gap in the market for cheap international money transfers, has used the passport to expand and trade across Europe. Many other fintech companies are following suit, making London the go-to place where the future of financial services is being developed. Leave the Single Market, and you take away this tool from our startups.
The passport also exists in some less known sectors, like broadcasting. Over half of all channels broadcasting in more than one EU state do so out of the UK, like the Discovery Channel and MTV – using only one license. If the UK were outside the Single Market, these broadcasters would have to choose between getting separate licenses in all EU states they want to broadcast in or moving out of the UK altogether.
The services passport is a hugely valuable tool for business that we would lose if the UK voted to leave the EU on 23 June. That is one of the many reasons why voting to stay in the EU will best protect jobs and secure Britain’s future growth.