UK will not seek ‘passporting’ rights for financial services

Britain_union_jackUK prime minister Theresa May has ruled out any attempt to keep valuable ‘passporting’ rights for financial services after the country leaves the EU.

During a speech outlining her vision for post-Brexit Britain in London’s Mansion House on Friday she said that the UK could not become a “rule taker” once Brexit is completed.

In a subsequent television interview broadcast on Sunday she said that the UK government would not seek to retain ‘passporting’ rules which allow finance firms in the EU to sell services across the 28-member bloc with a single local licence.

Instead, May says that she wants financial services to be included in a free trade deal with the EU – despite accusations from Brussels that this amounts to ‘cherry picking’ the best aspects of EU membership.

The statement is in contrast to promises made, in the aftermath of the June 2016 Brexit referendum, by the UK’s foreign secretary Boris Johnson who assured the US that financial firms based in the UK would still be able to sell services across the EU once the UK had left the trading bloc.

It is estimated that some 5,500 finance firms in the UK use passports to access the single market and that over 8,000 firms authorised in the other EU states use the rules to do business in the UK.

Last week Paul Drechsler, the president of the Confederation of British Industry – the UK’s largest commercial lobby group – urged the executives of UK firms to “speak up” to save “tens of thousands of jobs at risk”.

Speaking at a black tie dinner in the City of London, Drechsler said: “The real risk is to say nothing and reap the blame later for our silence now.”

TheCityUK, which lobbies for the country’s financial services industry, has taken a more conciliatory tone.

Chief executive Miles Celic said the industry recognised that passporting is a unique feature of the single market.

“It has long been clear that the UK will leave the single market which automatically means we will no longer be within the passporting regime,” he said.

TheCityUK is pinning its hopes on persuading Brussels to accept the UK government’s proposal for mutual regulatory recognition which he said would “allow our companies to continue to serve customers in the UK and EU-27 as closely as possible to the way we do today”.

“These recommendations are in the mutual benefit of both the UK and the EU. Moreover, they are pragmatic, realistic and achievable. We hope the EU will now respond positively and constructively to these proposals.”

According to a study by the Oliver Wyman consultancy, the UK’s financial services industry stands to lose up to 75,000 jobs in the case of the UK moving to third country status without regulatory equivalence and with low access to the single market.

Up to £38 billion (€42.6 billion) of revenues and up to £10 billion of tax revenues could also be lost in a hard Brexit scenario.

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