In order to lessen the impact Brexit chaos has exacted on Britain’s financial services sector, confidence urgently needs to be restored.
Even if Britain didn’t now leave the EU, the damage to the financial services industry has already been done.
Since the Brexit referendum in 2016, three years of uncertainty, indecisiveness and a lack of strong leadership from any political parties have led to finance firms being forced to take precautionary action in order to safeguard their interests.
Typically, this means relocating parts of their business or key members of staff, to places such as Frankfurt, Amsterdam, Dublin, Paris and Luxembourg, or indeed setting up legal entities within the European Union.
In certain cases, such actions have been undertaken publicly. However, this has not always been the case, as many haven’t been disclosed, which means the true extent of the situation is unknown.
Moreover, by having no meaningful access to the Single Market, the UK’s financial services sector is preparing for what may be a long-term, steady decline.
Taking into account this sector makes up about 6.5% of Britain’s GDP, this will unquestionably affect jobs and the government’s tax base.
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Therefore, even though the continual fall in investment, activity and talent within the industry can be reversed, and the situation could well recover, the real issue is the lack of confidence, which is dropping. Fast.
So, the real question is, how can confidence within the City be restored?
Chiefly, setting out rules for the sector is key. That said, in order to maintain the City’s competitiveness and attract business, it’s my opinion that Britain should move towards becoming known as being the low-tax hub of Europe.
As an example, corporation tax could be reduced to 15 per cent, income tax topped at 30 per cent and tax breaks and government assistance for businesses launched.
So far, as Brexit has plodded on, the financial services sector has far from been championed by the government. Quite the opposite. Politicians have under-appreciated the City for far too long, and now’s the time this needs to change.
Indeed, the sector must be advocated, vocally, in parliament, as there doesn’t seem to be a strong group of allies within government at present.
Understandably, financial services professionals believed that ministers would back their cause over and above other sectors, However, the industry has taken a back seat in order to protect manufacturing and secure an end to freedom of movement from the European Union.
Bearing in mind the EU accounts for some 20 per cent of the UK’s financial sector revenues, with half reliant on full access to the Single Market, Britain should concentrate on setting out rules and taxes to ensure the City remains competitive, and in line with other major financial hubs around the world such as New York and Shanghai.
As a result, following news this week of the extension to the Brexit deadline to 22 May should the Prime Minister’s Brexit deal be passed by MPs by the end of next week, or a hard deadline of 12 April should parliament reject the deal again, the time has come to support the City and regain the lost confidence that has been directly affected by Brexit.
Confidence needs to return to the financial services industry as soon as possible. To do that the government needs to show solid, united support and advocate a strong, pro-business stance.
Nigel Green, founder and CEO of deVere Group
