‘Hard Brexit’ could cost UK financial industry £38 billion
The British financial industry could lose up to £38 billion (€43 billion) in revenue in a so-called ‘hard Brexit’ that would leave it with restricted access to the European Union’s single market, according to a report commissioned by a financial industry group.
If finance firms lose the right to freely sell their services across Europe, 75,000 jobs may disappear, according to the report by consultancy firm Oliver Wyman.
There is growing speculation the sector – which includes retail banks, asset managers, insurers and investment banks – will lose rights as the British government negotiates its exit from the European Union.
“It is in everyone’s best interests for there to be a positive outcome to the negotiations that is mutually beneficial to the UK and the EU, causes minimum disruption to the industry and benefits customers,” said Hector Sants, Vice-Chairman of Oliver Wyman, and Britain’s former top financial regulator.
The report was commissioned by the industry lobby group TheCityUK.
Banks based in Britain are pushing for the government there to secure a transitional period for their industry amid signs the government may struggle to secure them any special treatment.
The future of London as Europe’s financial centre will be a major negotiating point in Brexit talks with the EU, because it is Britain’s largest export sector and biggest source of tax revenue.
Britain’s financial services sector generates between £190 and £205 billion of revenue each year and employs about 1.1 million people, the report said.
The industry pays about £60 to £67 billion in taxes.
The report outlines the impact of two different Brexit scenarios.
In the worst-case scenario for international banks where they lose all access to the single market, known as “hard Brexit,” then revenue may fall between £32 and £38 billion and between 65,000 to 75,000 jobs, the report says.
If Britain retains access to the European Economic Area on similar terms to currently then only 4,000 jobs may disappear and it would lose about £2 billion in revenue.