‘Brexit’ has been a buzzword within the political sphere for a while now, yet the advent of Britain leaving Europe would have an even more telling impact on financial services companies.
In January, David Cameron urged UK business leaders to make the case for an ‘in’ vote in the upcoming referendum – which could take place as early as June 2016.
However, support for staying in the EU among 137 chief finance officers at FTSE 350 companies dropped from 74 per cent in Q2 2015 to 62 per cent in Q4 2015, according to Deloitte in its CFO Survey.
It would appear that many of those CFOs who expressed unequivocal support for Britain remaining within the 28-nation bloc have now moved into the uncertain camp, with 28 per cent stating that their decision depended on the outcome of the Prime Minister’s renegotiation of UK membership – up from 23 per cent in Q2.
EU passport
A lot is at stake for UK financial services firms.
Europhiles have been quick to point out that Britain’s relationship with the EU is mutually beneficial. The EU is home to 14 of the world’s 30 systemically important banks and accounts for half of all global exports of financial services.
According to Bank of England (BoE) statistics, the UK financial sector accounts for 40 per cent of EU financial services exports, and almost a quarter of all income.
In addition, in 2014, the EU financial services sector added more than £500bn in value to the global economy – second only to the US.
One of the more pressing concerns centres on the EU single market ‘passport regime’ which allows banks and other financial firms authorised in the UK to operate across Europe.
A Brexit may force these companies to establish headquarters in mainland Europe in order to maintain their access to the single market, which would substantially increase their costs, according to Paul Edmondson, head of financial services at law firm CMS.
It is also extremely likely that a UK outside the EU would remain heavily influenced by EU law decisions Michael McKeeA 2015 study on the matter by Open Europe, stated: “Britain may be forced to choose between ‘third country’ status with restricted EU market access, or somehow remaining a member of the single market (such as Norway). That is, all EU rules but with no formal votes.”
Eurosceptics advocate the adoption of a Norway-style relationship with the EU. The Scandinavian country has access to the single market but is bound by EU legislation in a number of policy areas dealing with the single market through its membership of the European Economic Area (EEA).
