City passporting rights must become the government's first priority following Brexit, according to an influential think tank, which also argues that London can remain Europe's leading financial services centre.
A paper from the Margaret Thatcher founded Centre for Policy Studies today argues that while Brexit will bring challenges for the UK's financial services industry, it also create opportunities.
In particular, the CPS said the UK is now able to look at withdrawing from unpopular policy measures, such as the cap on bankers' bonuses, which it said has only forced fixed salaries in the City ever higher.
And while historical factors such as the UK's timezone, language and legal system will also play in favour of the City after separating from the EU, the think tank said, a more competitive tax regime developed under previous chancellor George Osborne will also mean the UK remains a force to be reckoned with as a financial services hub.
However, it admitted that potential the loss of passporting rights remains a concern.
London mayor Sadiq Khan has vowed to fight for the City's passport, and the CPS noted that any reduction in UK exports of financial services to the EU would harm efforts to reduce the UK's deficit, meaning that securing a rapid solution must become a high priority.
“Following Brexit, the government’s focus on financial services must be to offer reassurance on the issue of ‘passporting’, to ensure that new trading opportunities with financial centres outside the EU are pursued and to remove the UK from burdensome and costly regulations,” CPS paper authors Daniel Mahoney, Tim Knox and Jon Moulton said.
“It is now imperative that the government examines the best blueprint for the UK’s financial services industry.
“Switzerland has a successful finance industry outside the EEA, showing that alternative arrangements are very possible. London’s existing status as a global financial centre means that the UK is in an even better place to reach an agreement – given that EU businesses will also want to retain access to the UK’s financial services.”