Financial services firms continue to move jobs, assets and people to the EU, while calling on the government to ensure the UK maintains a cooperate trading relationship with the bloc.
Since the referendum, a total 24 financial services firms have publicly declared they will transfer UK assets to the EU.
Not all of those firms have publicly declared the value of the assets they plan to transfer, but consultancy giant EY has estimated the figure could be almost £1.3 trillion.
More than two in five (43 per cent) of financial services firms have moved or plan to move some UK operations and/or staff to Europe, taking the total number of Brexit-related job moves to almost 7,600.
Dublin and Luxembourg are the most popular destinations for staff relocations, new European hubs or office relocations.
EMEIA financial services managing partner for client services at EY, Omar Ali, said there will likely continue to be a slower yet ongoing movement of people and assets to Europe for compliance purposes.
“UK and EU Firms are now awaiting the detail of the upcoming Memorandum of Understanding (MoU) on Financial Services and will shortly face into a new round of Brexit discussions on the framework that will ultimately define the future relationship,” he said.
“The challenges remain significant, and, as recent headlines evidence, the push and pull of markets across Europe for business historically led from the UK continues. Such ongoing uncertainty poses the risk of fragmented markets, which is inefficient and costly for all financial services users and potentially damaging to the global competitiveness of both the UK and EU.”
Brexit hurting business
According to EY, more than a quarter (26%) of financial services firms have publicly stated that Brexit is impacting or will negatively impact their business.
Since late December 2020 and in the two months since the Brexit deal, ten FS firms – made up from some of the largest retail and investment banks and wealth and asset managers operating in the UK – have publicly urged the UK government and regulators to ensure that the UK sector remains competitive and open for business.
Public statements included calling for an operating environment that is accessible to both local and international trade and services businesses, and assurance that London does not lose its grip on its role as a key European trading hub.
But an early draft of the MoU leaked last week suggested the City of London’s finance industry would be worse off than rival New York when it comes to trading with the EU.
One financial services sector source said the EU text is deliberately more unambitious that the US agreement and does not reflect even the current depth of relationship with bilateral MoUs already signed between individual regulators in Britain and the EU.
Brussels can grant direct market access for foreign financial companies if it deems their home market rules are as robust as the EU’s own standards, a system known as “equivalence.”
A person familiar with Britain’s negotiating position said the UK focus is on making sure the MoU provides transparency and appropriate dialog when it comes to adopting, suspending and withdrawing equivalence decisions.
Currently, the EU can in theory scrap equivalence decisions with just 30 days’ notice.
Under the US deal with the EU, equivalence is treated as “outcomes-based.”
Britain has called for EU equivalence also to be outcomes based, which would ensure that the focus would be on whether financial rules in Britain and the EU produce the same result, but there is no mention of outcomes-based equivalence in the draft EU-UK memorandum.