Unless the financial services passporting rules are resolved in the UK’s favour, a global law firm has predicted many large financial services businesses are likely to relocate to within the European Union.
Passporting rules mean that subject to its fulfilment of conditions under the relevant single market directive, a firm authorised in a European Economic Area state is entitled to carry on permitted activities in any other EEA state.
Nick Elwell-Sutton, partner at law firm Clyde & Co, said while in the immediate short term nothing changes – it is business as usual - large financial services providers will now be looking at whether they need to move out of the UK.
Mr Elwell-Sutton said: “Employers will need to consider how they will be affected once the exit actually occurs.
“Watering down of employment rights is unlikely to be an immediate government priority, however revoking freedom of movement means the ability to recruit skilled EU nationals, which is currently taken for granted would be curtailed and they would be subject to whatever immigration and work permit rules then apply.
“At a more fundamental level, unless the financial services passporting rules are resolved in the UK’s favour, then many large financial services businesses are likely to relocate to within the EU meaning large scale redundancies would be highly probable.”
James Coiley, finance partner at law firm Ashurst, said longer term, Brexit has the potential to affect the strategy and footprint of many financial services firms.
He said firms will need to fight their corner with legislators and regulators in a bid to ensure that they can continue to access markets in their current form, failing which they need to be prepare from now to respond to events as they unfold through the political process.
Mr Coiley said: “Our message to business is not to panic, the vote is only the first step to resolving the uncertainties relating to Brexit – there will be time for issues to be considered and resolved, and businesses to adapt to this new era.”
The FCA has stated financial regulation currently applicable in the UK derives from EU legislation will remain applicable until any changes are made.
The regulator stated that will be a matter for government and parliament.
The FCA stated: “Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.
“The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future.”