Britain’s financial services sector could retain its pre-eminent global position even if voters opt to leave the European Union, according to a leading economics consultancy.
The potential impact of Brexit on the Square Mile is likely to be a key factor shaping the government’s thinking as it seeks to renegotiate Britain’s relationship with the EU in the coming months. But Vicky Redwood, UK economist at Capital Economics, said her analysis suggested the short-term costs could be outweighed by longer-term benefits.
“A British exit from the EU would probably hurt the City in the short term, but it would not spell disaster,” she said in a research note.
“The City’s competitive advantage is founded on more than just unfettered access to the single market. And an EU exit would enable the UK to broker trade deals with emerging markets that could pay dividends for the financial services sector in the long run.”
British exports of financial services to the EU were worth £19.4bn in 2013, against imports of just £3.3bn.
Redwood warned that up to half of those exports could be at risk in the short term as Britain surrendered the “passporting” rights that enable UK-based businesses to sell to consumers throughout the EU.
However, she insisted that once freed from the fetters of the EU, Britain could make bilateral trade agreements with emerging economies outside Europe, potentially creating lucrative new opportunities for financial services business.
“The City possesses intrinsic advantages, including the UK’s legal system, the English language, a convenient timezone, openness to immigrants, a large pool of skilled labour and a critical mass of expertise in support services such as accounting and law,” she said.
Protecting the City’s independence has repeatedly put the chancellor, George Osborne, on a public collision course with his eurozone colleagues in recent years, most notably over the cap on bankers’ bonuses, which was imposed against Britain’s will.
Separately, the British Chambers of Commerce published a survey of more than 2,000 business leaders, which shows that while 63% would be minded to vote to remain in the EU if a referendum was held now, as many as half might change their mind, depending on the outcome of David Cameron’s negotiations with his EU partners.
The prime minister hopes to win key concessions, including on restricting the freedom of movement of people, enabling him to campaign for Britain to remain in the EU in the referendum he has pledged to hold by 2017.
John Longworth, the BCC’s director general, said: “Businesspeople want more clarity on the prime minister’s renegotiation plans before they have their say on Britain’s future in the EU. With half keeping their options open before making up their mind on how to vote, business’s top concerns need to be at the top of Downing Street’s negotiation agenda.”
This article was written by Heather Stewart, for theguardian.com on Friday 25th September 2015 00.01 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010