Financial Services feeling optimistic about Brexit
The UK financial services industry projected a very positive stance at last week’s City Week international financial services forum in London.
Brexit was a key topic at the event. There was growing acceptance and understanding of the likely path to Brexit and a greater focus on what agreement is needed to achieve this, for the UK FS industry and for the EU.
Contingency plans are clearly being formed and implemented. There now seems to be an acceptance of the additional costs and processes, but there is a greater positivity and a focus on the opportunities which may lie ahead for the sector.
Three key messages to Government on Brexit
Miles Celic from TheCityUK referred to the key messages which the FS industry had passed to Government:
- the need for a bespoke deal with the EU (as none of the existing arrangements such as EEA, EFTA or the Swiss or Turkish model would suit the UK),
- the need for a bridging period from the end of negotiations until Brexit day and a period of adaptation thereafter to ensure continuity,
- and ongoing mutual access to the necessary talent (for both UK and EU).
With FS making up 11% of UK GDP, it is critical to the success of the FS industry and the UK generally, that a successful deal is agreed.
The UK Government's position on Brexit is hugely important, and disappointment was expressed that the Conservative manifesto included some anti-immigration messages and proposals for market interventions.
The FS industry seems very encouraged that the Government now understands its needs and is hopeful that an acceptable deal will be negotiated.
With membership of the Single Market and EU Passporting now out of the question, there was acceptance that, against the background of international standards and regulation, mutual recognition between the UK and EU would be the way forward.
Clearly on Brexit day the Great Repeal Bill will ensure that our regulatory systems are virtually identical. After that date, the UK will have the power to make changes, but against the backdrop of international standards such as Basel II and G20 agreements, whilst there may be some scope for deregulatory measures, they are unlikely to be able to diverge very far.
It is likely though that there will be a need for periodic assessments to ensure that there is a continuing basis for mutual recognition, which will not only need to cover the comparability of the laws, regulations and standards, but also how they are implemented supervised and enforced.
Assurance in London’s reign
There remains confidence in the strength of London as the foremost global city for financial services. Rather than a Jenga tower, about to tumble, The City was likened to the Tower of London, robust and with solid historical foundations.
London and the UK have a long history in providing things which the rest of the world wants to buy, and there is a great respect for the fairness and equity of British law which underpins UK competitiveness. However, many speakers warned of not being complacent, noting that London still has to work hard to market itself in a very competitive and fast changing global environment.
FinTech is a fierce new area of FS - with at least 20 hubs competition is intense. But London is a strong competitor: it is the fastest growing FinTech hub in the world, with employee numbers not far behind the US. Apparently 60% to 65% of FinTech is focused on customers, with three main drivers: personalisation and improving the experience, simplicity, and speed.
The speakers felt that the UK is well positioned to benefit from global liberalisation of trade in services, but this is an area fraught with difficulties and where negotiations have already slowed.