A poor deal on financial services as Britain leaves the European Union would have a wider impact than just on London as a financial centre, according to a report published today (26 July).
The report, by the Centre for Cities think tank, found Cardiff, Edinburgh and York would be among the biggest losers if Britain secured a bad deal for the sector when it departs from the EU.
In all three of these cities, financial services makes up a higher proportion of their total exports than it does for London.
In Cardiff, for example, financial services make up 54 per cent of total exports and 81 per cent of services exports, while in Edinburgh these figures are 56 per cent and 69 per cent respectively.
While the total values in London are bigger - the capital exports £31bn in financial services compared with Cardiff's £914m - the City only accounts for 29 per cent of the capital's total exports.
The report said: "Although London is the leader in financial services exports in absolute terms, it is not the city most reliant on them.
"While a change in the UK’s trading relationships - both positive and negative - for financial services would in aggregate affect London the most, there would be substantial consequences for many other British cities."
As well as Cardiff and Edinburgh, the report also found York and Leeds would be affected since finance makes up 43 per cent and 34 per cent of their total exports respectively.
But the report also highlighted that any impact on a London-headquartered business could have a further ripple effect across the country.
It found just more than one in five finance jobs in other cities was in a London-headquartered business, with most of these being in Norwich, Telford and York.
There were also a number of cities where there were strong links to London-based financial services businesses, but the jobs were in lower-skilled sectors, such as Sunderland, Swindon, Middlesbrough and Birmingham.
Many of the jobs in these cities are in customer services or retail bank sales, the report said.
It added: "As the UK prepares to leave the European Union, the nature of future trading relationships across the world will have implications for exports of all goods and services.
"While London undoubtedly plays a large role in Britain’s financial and associated professional services sectors, this report shows that the terms of a deal on financial services will have implications beyond the capital too."
Earlier this week the government announced that European rules would continue to apply to the UK until the end of 2020 if a transitional period is agreed as part of the Brexit withdrawal negotiations.
damian.fantato@ft.com
