With Brexit at the forefront of the nation's attention, what are the financial implications?
Brexit is the word on everyone’s lips at the moment. From the content of any proposed deal to the question marks over the future of the government, each passing day seems to bring a new twist and turn. Every industry in the UK’s economy will likely experience some kind of consequence, either positive or otherwise, due to Brexit – but it’s very difficult to predict in advance what this might look like. This blog post will shed some light on the role Brexit might play for the finance industry.
Changes to passporting
In the context of Britain’s relationship with the EU, the term “passporting” has a specific meaning. It gives companies which have regulatory approval in one European country the right to carry out their activities in another EU country as well. After Brexit occurs, however, it’s likely that an end will be spelled to passporting – meaning that activities which are carried out across borders could soon become subject to individual regulatory agreements. However, it does depend in part on the outcome of any trade negotiations, so it may well be wise to simply watch this space instead.
Movement of labour
The term passport is likely to come up again for many finance industry leaders as Britain negotiates its EU exit, but this time with a different meaning. The rights of those from non-UK European nations to work in Britain have long been enshrined in the law, but Brexit could change that. The city of London, which is Britain’s financial industry hub, is believed to employ almost one in every five of its workers from an EU country, so any change in status could have a big knock-on effect for the finance sector. While it is not yet fully clear what rights European citizens will have, it’s certainly possible that firms as a whole will start to either hire UK-based people only or avoid the UK as a base altogether if administrative burdens begin to stand in the way of cross-border hiring in Britain post-Brexit.
The word “export” conjures up images of physical goods travelling across borders. However, services, like those offered by the finance industry, are also exports. As Grant Thornton has reported, financial service exports make a £67bn contribution to the British balance of trade, so if the finance industry isn’t protected if and when Brexit takes place, there could be much wider implications for Britain’s status as a global exporter.
So, while the finalisation of the Brexit process continues to play out in London, Brussels and elsewhere, there’s still no exact consensus on what will occur. All that can really be said with certainty is that those who work in the finance industry, whether in the city of London or beyond, need to be thinking very carefully about their plans.
However, the Brexit saga pans out, it’s always going to be worth ensuring your firm’s finance function is in good shape, we can help.