RegulationApr 27 2016

UK firms have ‘little to gain and much to lose’ over Brexit

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UK firms have ‘little to gain and much to lose’ over Brexit

Advisers and providers are caught between a chance at freedom from the onerous elements of EU-wide regulations via a vote to exit the EU, and the fact that such a move would risk losing their ‘passport’ rights into the European market, experts have said.

A referendum on the UK’s membership of the EU will be held on 23 June. If the nation votes to leave, two years of negotiations will determine how the relationship might work for trade, law and regulation.

A recent report from financial services lobby group The City UK pointed out if UK-based firms lost access to the EU passporting regime, they would forefeit the right to automatically supply services on a cross-border basis, impacting the viability of their businesses.

Lucy Frew, head of financial regulatory at law firm Kemp Little, said many providers and advisers have railed against EU regulations, but must consider what a regime could look like post-Brexit, and what they might lose as part of the process.

“Broadly speaking, most UK-based advisers have little to gain and, if they have business operations or customers in the EU, much to lose from a possible British decision to leave the EU and EEA (European Economic Area),” she said.

Pinsent Masons’ financial services regulatory partner Elizabeth Budd said it was hard to realistically see huge de-regulation, with instead domestic legislation used to create a “holding position” until deals are done.

Rob Moulton, regulatory partner at law firm Ashurst, said, while technically, the UK could ditch EU regulations currently being implemented, “practically, it ain’t going to happen”.

Among providers Zurich UK Life’s head of regulatory developments Matt Connell said it was likely the various EU-wide regulations would be used as bargaining chips by the government.

Gareth Evans, head of corporate affairs at Royal London, and chair of the Association of British Insurers’ EU Committee, said it all depends on the settlement reached between the UK and EU.

“I think most likely we’d opt for a European Trade Agreement much like the one Norway has, which would bind us to existing and forthcoming EU regulations.”