As a provider of company secretarial services and expertise here at London Registrars, we naturally take a great interest in the ongoing effects the UK’s departure from the European Union is exerting on the City of London.
One development that caught our eye in this regard was the release of a report by think tank New Financial in April, detailing how Brexit has so far reshaped the financial services sector across the UK and Europe.
There’s no question that the report – which draws upon a combination of regulatory registers, media reports and other research reports, as well as information from development agencies and government bodies – will be a sobering read for many in the UK.
How ‘Brexit has meant Brexit’ for financial services firms across the continent
Circular arguments about Brexit and its potential and likely consequences – both positive and negative – have unquestionably dominated much of political conversation since the 2016 referendum that returned a vote in favour of the UK leaving the EU.
Now, however – more than six months on from the end of the transition period – the financial services industry in both the City of London and wider Europe is beginning to see some of the more concrete outcomes of the UK’s departure from the bloc.
Those include – according to the New Financial report – more than 440 firms in the UK banking and finance industry having responded to Brexit by relocating part of their business, moving some personnel, or setting up new entities in the EU.
According to the think tank, banks are moving or have moved over £900 billion in assets from the UK to the EU, while insurance firms and asset managers have transferred assets and funds amounting to more than £100 billion.
New Financial said that when it published its first report on the impact of Brexit in March 2019, it identified 269 firms that had relocated something. Fast-forwarding to April 2021, the social enterprise observed that it had since identified another 170 firms in the banking and finance sector that had moved something as a consequence of Brexit.
As for the other parts of the EU that have most benefitted in terms of attracting business from the UK post Brexit, Dublin topped the list, with 135 firms, accounting for 25% of all moves the think tank identified. The Irish capital was followed in the ranking by Paris with 102 firms, Luxembourg with 93, Frankfurt with 62, and Amsterdam on 48.
Where next for UK financial services in the aftermath of Brexit?
While the report largely reads gloomily from the perspective of the financial services sector in the UK, there were nonetheless some sources of solace in the findings.
New Financial said that even amid the moves from the UK to the EU it had observed so far, there was “no question” that London would remain Europe’s dominant financial centre “for the foreseeable future.”
The think tank said that “firms are keen to keep as much of their business in London as possible and even the biggest relocations represent a maximum of 10% (so far) of the headcount at individual firms.” The organisation also noted that the movements were not entirely one-way traffic, estimating that “around 300 to 500 mainly smaller firms may open an office in the UK”.
The think tank added, however, that “the shift in business, assets and legal entities will gradually chip away at the UK’s influence in the banking and finance industry in Europe and around the world, as a greater proportion of business is authorised by and conducted in the EU.”
Looking forward, the organisation also observed: “The ‘good’ news is that the extent of this relocation activity means that most firms in the UK that need continued access to clients and markets in the EU now have it.
“With that access in hand, this is perhaps an opportunity to draw a line in the sand, treat Brexit as a sunk cost, and move beyond the debate of the past few years of how closely the UK should remain aligned to the EU in exchange for more access to EU markets.”
As the think tank regarded such access as “unlikely to be forthcoming”, it suggested that “it is perhaps better for the industry to take the damage from Brexit on the chin and focus instead on recalibrating the framework in the UK so that it is more tailored to the unique nature of the UK financial services industry.”
Prepare your business for success in the 2020s with our help
Brexit may mean many different things to many different people, but some things don’t change for UK firms. One of those is the key impact the right company secretarial suport can have on the fulfilment of their compliance, productivity and growth objectives.
Enquire to the London Registrars team today, and we will be pleased to have a more in-depth conversation with you about the possibilities for how we could work together.