More than 1000 banks, asset managers, payments firms and insurers from the European Union are planning to open offices in post-Brexit Britain so they can continue to serve UK clients.
The new offices would help financial firms counter the loss of business as unrestricted two-way access between the UK and EU comes to an end in December following a Brexit transition period.
By October last year 1,441 EU-based firms had applied to the Financial Conduct Authority (FCA) for temporary permissions to operate in the UK after Brexit, according to figures obtained via a Freedom of Information request from regulatory consultancy Bovill.
Over 1,000 of these firms do not currently have an office in the UK, suggesting they intend to establish their first office after the UK’s departure from the EU on 31 January.
“These figures clearly show that many firms see the UK as Europe’s premier financial services hub,” said Michael Johnson, a consultant at Bovill.
The firms applied to operate in the UK under the Temporary Permission Regime (TPR), which will come into force when current passporting permissions between the UK and EU become defunct, allowing companies from the bloc to operate in the UK while they seek full permission from the FCA.
Johnson called the figures “a clear vote of confidence in the UK financial services sector and good news for the UK’s service economy overall.”
“The high proportion of firms without an existing UK branch that have applied for the TPR suggests there will be some movement of staff from these EU firms into the UK,” he added.
Big Four firm EY said today that large UK-based firms had now implemented plans enabling them to continue operating in the EU after Brexit. It estimated that around 7,000 positions would be relocated from London to the continent and a further 2,400 jobs created and hired for locally at the new EU hubs.
The full extent of the UK and EU’s access to each other’s markets after the end of the transition period in December is subject to ongoing negotiations, but the resulting agreement is unlikely to cover the full range of financial services.
The City yesterday responded with cautious approval to a statement by chancellor Sajid Javid that UK financial services’ trade with the EU should be on the “outcome-based” equivalence of rules.
Javid had faced a backlash after saying the UK would diverge from EU regulations post-Brexit, and that firms would have to “adjust” to this.
City of London Corporation policy chair Catherine McGuiness said: “Securing an ‘outcome-based’ equivalence of rules as suggested by the chancellor would be a step in the right direction.”
Over 300 British financial firms have opened EU hubs to continue serving clients in the bloc post-Brexit, according to a recent survey by think tank New Financial.
Bovill’s figures show that 228 Irish firms had applied for temporary permissions to keep serving British clients while they obtain full regulatory authority to establish a new UK office.
Dublin is a popular location for UK-based asset managers and insurers to establish EU hubs, due to the strong ties between the two countries.
Financial services firms from France, Cyprus and Germany have applied for 170, 165 and 149 temporary permissions respectively.
“In practical terms, these figures mean that European firms will be buying office space, hiring staff and engaging legal and professional advisers in the UK,” said Bovill partner Ed O’Bree.
“This augurs well for the UK economy, as the country will retain its reputation as a prime location for financial services in Europe.”