Brexit  

More than 5,400 UK financial firms face Brexit risk

More than 5,400 UK financial firms face Brexit risk

More than 5,400 UK firms use passports to do business in Europe, according to figures from the Financial Conduct Authority, leaving them at “significant” risk as the UK negotiates its exit from the EU.

In addition more than 8,000 European firms use passports to do business in the UK.

The figures have been published by the FCA’s chief executive Andrew Bailey at the request of Treasury Select Committee chairman Andrew Tyrie.

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Firms can hold multiple passports for different business activities and different member states, meaning the total number of passports held by UK firms is 336,421.

In total 5,476 UK-registered firms hold at least one passport to do business in another EU or EEA member state.

Mr Tyrie said: “These figures give us an initial idea of the effects of losing full access to the Single Market in financial services. The business put at risk could be significant.

“None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops.

“Efforts to secure an appropriate arrangement for UK-based firms will be one of the most challenging aspects of the negotiations about the UK’s future relationship with the EU.

“This issue needs to be right at the top of the in-trays of the chancellor, the governor of the Bank of England, and the UK’s lead negotiators.”

Firms can hold passports under different directives depending on the nature of the activity they are seeking to do in another European country.

The bulk of passports are issued either under the original Mifid directive, covering cross-border investment services, or the Insurance Mediation Directive.

Last month the secretary general of the European Federation of Financial Advisers and Financial Intermediaries said passporting is the main issue which UK advisers should be concerned aboutduring the Brexit negotiations.

Negotiations into the UK’s future relationship with the European Union are likely to begin next year.

One option is to become a member of the European Economic Area like Norway which would give passporting rights but no restrictions on freedom of movement and would oblige the UK to contribute financially towards the EU.

Switzerland is not an EEA member but has signed special bilateral treaties with the EU covering issues such as insurance, but it also contributed financially.

A number of experts have said the UK’s access to the European market will depend on continuing to follow its rules.