Britain’s small and mid-sized financial services businesses fear additional costs related to Brexit, research has revealed.
A paper published by Harvard University, and written by former shadow chancellor Ed Balls and former Standard Chartered chief executive Peter Sands, was produced based on interviews with more than 50 mid-sized British businesses and trade associations.
The paper warned that small and middle-sized businesses are the “backbone” of the UK economy and Brexit poses “significant challenges” for them.
The paper stated: “Businesses that rely heavily on harmonised regulation fear additional costs, loss of competitiveness and loss of influence on future regulations.
“Industries significantly affected include pharmaceuticals, since drug approval is harmonised across the EU, financial services, given the importance of ‘passporting’ in enabling provision of financial services across the EU, and the creative industries, given their reliance on EU rules on intellectual property, data privacy and digital rights.”
The research found that most firms were broadly satisfied with the current regulatory approach.
In fact the research found small and medium companies were worried they would have more red tape to deal with once Britain left the European Union.
The paper said: “Companies want Brexit to lead to streamlined regulation, not more regulation. Yet none of the firms we spoke to expect a regulatory ‘windfall’.
“Indeed, many expressed concern that Brexit would paradoxically result in an increased regulatory burden.
“If British regulations diverge from European Union standards, companies that export to the EU will now have to comply with an additional set of regulations.
“We also heard repeated concerns about the potential costs associated with employing EU citizens if companies are forced to navigate complex new immigration rules.”
In response, the paper made a number of recommendations, including negotiating a new trade deal which kept Britain as close to the single market as possible.
It also recommended an arrangement to minimise “unwarranted regulatory divergence”, an immigration framework which gave British business access to skilled and seasonal EU labour and making sure the Brexit process allowed UK business to take advantage of broader changes such as technological developments.