Brexit and Financial Services: What Comes Next?
Author | |
DOI | 10.3366/elr.2018.0467 |
Published date | 01 January 2018 |
Date | 01 January 2018 |
Pages | 149-155 |
Like many areas concerning Brexit, accurately predicting the outcome of negotiations concerning the provision of financial services and future developments is problematic. The Brexit White Paper states “In our new strategic partnership agreement we will be aiming for the freest possible trade in financial services between the UK and EU member states”.
The UK and the remaining EU-27 states benefit from passporting due to the different concentration of expertise in financial matters across the Union. It is far easier to access financial expertise across borders through enabling the provision of a service rather than by relocating individuals. “Freest possible” trade would entail remaining a member of the single market. Yet there have been repeated statements that the UK will leave the single market. Accordingly, the relationship will at least be different.
Passporting rights create a strong incentive for institutions to maintain a presence in an EU member state. As CityUK states, “There are more head offices of banks in London than in any other place in the world…There are also over 250 foreign banks with an office in London. This is higher than nearest rivals New York, Paris and Frankfurt”.
Passporting rights are only one part of the equation however. If all single market states were equal, in theory it would make no difference in which state banks are established. There must be another reason why London specifically hosts a higher concentration of overseas financial institutions. This relates to the particular expertise located in London. CityUK state “London is the second largest global fund management centre. It manages more than 80% of hedge fund assets under management in Europe, 90% of European prime brokerage, and is the leading centre for management of European private equity funds”.
From a UK perspective, losing passporting rights means it may no longer be as attractive a place for establishment, which may lead to...
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