Brexit: how could it impact financial services?
In case you hadn’t noticed, on 23 June Britain is being given a vote on whether it wants to remain a member of the European Union. The In and Out camps are polling fairly evenly and either outcome seems possible. Naturally there’s bickering over what a Brexit would entail, but there seems to be a general consensus that the UK’s future economic performance would depend on the types of trade agreements it can subsequently strike.
George Osborne, the pro-EU chancellor, has published a Treasury analysis of three possible post-Brexit trading scenarios and concluded, to no one’s surprise, that the economy would suffer under all of them. “Britain will be worse off by £4,300 a year per household if Britain votes to leave European Union!” thunders the Treasury. “Spurious and entirely unbelievable!” holler back the Brexiteers.
Polls of the public and business people have found exasperation at the lack of balanced information on the pros and cons of membership. As with the Scottish independence referendum in 2014, many analyses feel inescapably coloured by one interest or another. So for what it’s worth, here’s an attempt at an objective, two-paragraph summary of the main views on financial services:
Many think the immediate effects of a leave vote would be a weaker pound and market volatility. A Financial Times poll of economists in January found they overwhelming believe a Brexit would harm economic growth in the years immediately afterwards, with inward investment, exports, job creation and household spending all probably taking hits.
But longer-term, the outlook improves. Capital Economics, a consultancy, argues things could eventually be more positive outside the bloc than if Britain voted to remain. The “potential net benefits” it touts for a few years after the referendum include lower levels of regulation, savings to public spending and the freedom to make trade deals.
(Ah yes, the trade deals. So Britain would need to negotiate new agreements with the EU and other countries; this could take 10 years, according to the government. Optimists say there would be opportunities to do business with fast-growing emerging economies. Meanwhile the financial sector is concerned it will lose access to the single market – known as “passporting” – obliging banks and insurers to apply for new licences and shell out extra cash to set up EU subsidiaries.)
OK, that was three paragraphs. But what does all this mean? Well the reason we’re having this debate is that no one can agree. The opposing camps will continue to make their cases; we have two months of campaigning to go before the British public makes up its mind. And even then the matter won’t be settled. When it comes to Brexit, it seems, the only thing that’s certain is that there’s a lot of uncertainty.
Brexit, Economics, financial pr, George Osbourne, Public Policy