Research released last week said the Brexit impact on financial services will “vary dramatically with how much access to the EU is retained”.
This excellent report, produced by consultants Oliver Wyman and commissioned by TheCityUK, with input from senior industry practitioners and the major trade associations, comes at a good time. What they have done is add to the comprehensive fact base on both the size and importance of the sector, and contributed much needed information as to what the future may hold for financial services.
This wasn’t an exercise in scaremongering. This was an attempt to lay out some of the detail and communicate it succinctly to policymakers. At one end of the spectrum, it said that, if the UK is outside of the European Economic Area but keeps passporting, equivalence and allows Single Market access, there would only be a modest disruption. Their estimates were revenues down by £2bn, a loss of 3,000-4,000 jobs and tax revenues falling by half a billion pounds. The report added that a clear and sensible transition process would help mitigate this process by providing that key word that all businesses want to see: certainty.
However, their analysis also showed that, if the UK reverted to third country status, without equivalence, we could see EU-related business revenues down by £18-£20bn per year, 31,000-35,000 jobs being lost and a fall of £3-5bn in tax revenues per year in the sector. When taking into consideration the knock-on impact on the whole financial services ecosystem – the possibility of the shifting of entire business units, or the closure of lines of business due to increased costs – it could almost double the effect of Brexit.
It is important that the government fully takes into account all the assessments that every industry provides them with – not just what we submit from the financial and professional services industry.
We welcomed the Prime Minister’s Conservative Party conference speech last week, which identified financial services as one of the sectors of “strategic importance” and one her government would “encourage, develop and support”. But we should not just protect the City because it deserves to be looked after, but because it creates thousands of jobs, raises billions in tax revenues and supports the efficient functioning of the economy.
This is one of the messages that the City struggles to effectively communicate. Another is that this is not just a London-centric issue. If we’re talking about 75,000 jobs at risk in financial services, not all of these would be in London. They would also be in financial districts across the UK, from Birmingham to Manchester, Edinburgh to Belfast. Two-thirds of jobs in the financial and professional services sector are found outside of London, but all too often people think “finance” and assume “London”.
In the City, we clearly have a job on our hands communicating this message.