Following the announcement on Monday by Michel Barnier the Chief EU Brexit negotiator, that post Brexit, UK banks will lose ‘passporting rights’ to do business in the EU, GlobalData, a leading data and analytics company offers a reassuring assessment on the likely long term impact this may have on the UK Banking sector.
As a consequence of Brexit UK financial service providers will lose their EU passport which allows them to offer their services to a market of 22 million businesses and 511 million consumers. In the City of London it is estimated that over 5,400 British firms rely on passporting rights to bring in £9bn per annum in revenues to Britain.
Barnier confirmed that “On financial services, UK voices suggest that Brexit does not mean Brexit. Brexit means Brexit, everywhere.”
Daoud Fakhri, Prinicipal Retail Banking Analyst at GlobalData, commented
‘‘The probable loss of passporting rights that give UK-based banks the freedom to operate across the EU, as confirmed by the EU’s chief Brexit negotiator Michel Barnier, will pose significant, but not insurmountable, challenges for the UK’s financial sector.
‘‘Loss of passporting means, for example, that a US bank with a UK office will have to establish a significant presence in an EU member state in order to maintain its access to continental markets. However, while this will result in the transfer of some business from London to, for example, Paris and Frankfurt, with an associated loss of jobs and revenue, a mass exodus is unlikely.
‘‘ London is a well-established financial center that operates globally as well as on a European level. It is home to many thousands of highly experienced staff, and benefits from a comprehensive infrastructure that encompasses legal and other services. The high density of banks, support services, and personnel give London a huge competitive advantage with respect to economies of scale and network effects. London will also retain its considerable cultural and social attractions, a not insignificant factor for the banking community.
‘‘These are significant factors in London’s favor, and will go a long way towards countering the impact of Brexit. Although London may lose some ground to competing financial centers, its overall status as a global powerhouse of finance is not under threat.’’