One development that caught our eye in thisregard was the release of a report by think tank New Financial in April,detailing how Brexit has so far reshaped the financial services sector acrossthe UK and Europe.
There’s no question that the report – which drawsupon a combination of regulatory registers, media reports and other researchreports, as well as information from development agencies and government bodies– will be a sobering read for many in the UK.
How ‘Brexit has meant Brexit’ forfinancial services firms across the continent
Circular arguments about Brexit and its potentialand likely consequences – both positive and negative – have unquestionablydominated much of political conversation since the 2016 referendum thatreturned a vote in favour of the UK leaving the EU.
Now, however – more than six months on from theend of the transition period – the financial services industry in both the Cityof London and wider Europe is beginning to see some of the more concreteoutcomes of the UK’s departure from the bloc.
Those include – according to the New Financialreport – more than 440 firms in the UK banking and finance industry havingresponded to Brexit by relocating part of their business, moving somepersonnel, or setting up new entities in the EU.
According to the think tank, banks are moving orhave moved over £900 billion in assets from the UK to the EU, while insurancefirms and asset managers have transferred assets and funds amounting to morethan £100 billion.
New Financial said that when it published itsfirst report on the impact of Brexit in March 2019, it identified 269 firmsthat had relocated something. Fast-forwarding to April 2021, the socialenterprise observed that it had since identified another 170 firms in thebanking and finance sector that had moved something as a consequence of Brexit.
As for the other parts of the EU that have mostbenefitted in terms of attracting business from the UK post Brexit, Dublintopped the list, with 135 firms, accounting for 25% of all moves the think tankidentified. The Irish capital was followed in the ranking by Paris with 102firms, Luxembourg with 93, Frankfurt with 62, and Amsterdam on 48.
Where next for UK financial services inthe aftermath of Brexit?
While the report largely reads gloomily from theperspective of the financial services sector in the UK, there were nonethelesssome sources of solace in the findings.
New Financial said that even amid the moves fromthe UK to the EU it had observed so far, there was “no question” that Londonwould remain Europe’s dominant financial centre “for the foreseeable future.”
The think tank said that “firms are keen to keepas much of their business in London as possible and even the biggestrelocations represent a maximum of 10% (so far) of the headcount at individualfirms.” The organisation also noted that the movements were not entirelyone-way traffic, estimating that “around 300 to 500 mainly smaller firms mayopen an office in the UK”.
The think tank added, however, that “the shift inbusiness, assets and legal entities will gradually chip away at the UK’sinfluence in the banking and finance industry in Europe and around the world,as a greater proportion of business is authorised by and conducted in the EU.”
Looking forward, the organisation also observed:“The ‘good’ news is that the extent of this relocation activity means that mostfirms in the UK that need continued access to clients and markets in the EU nowhave it.
“With that access in hand, this is perhaps anopportunity to draw a line in the sand, treat Brexit as a sunk cost, and movebeyond the debate of the past few years of how closely the UK should remainaligned to the EU in exchange for more access to EU markets.”
As the think tank regarded such access as“unlikely to be forthcoming”, it suggested that “it is perhaps better for theindustry to take the damage from Brexit on the chin and focus instead onrecalibrating the framework in the UK so that it is more tailored to the uniquenature of the UK financial services industry.”
Prepare your business for success in the2020s with our help
Brexit may mean many different things to manydifferent people, but some things don’t change for UK firms. One of those isthe key impact the right company secretarial suport can haveon the fulfilment of their compliance, productivity and growth objectives.
Enquire to the London Registrars team today, and we will bepleased to have a more in-depth conversation with you about the possibilitiesfor how we could work together.
