Companies within the UK financial services sector could be forced to relocate to mainland Europe if British voters decide to leave the European Union on 23 June, says Colonial First State Global Asset Management (CFSGAM).
In a note to investors, CFSGAM noted the UK would have two years following a Brexit to negotiate new trade and export regulations with the EU.
Based on the British government’s own estimates, it would take “up to a decade” to reach adequate trade deals for each sector, said CFSGAM.
After the two-year negotiation period, the most likely outcome for the UK would be a “disorderly exit” with no replacement agreements to substitute current EU arrangements, the note said.
Export to the EU comprises more than 40 per cent of the financial services industry’s market, and leaving the EU would likely result in UK service providers being locked out of the EU single market, severely impacting the financial services and insurance industries, said CFSGAM.
Bank of England governor Mark Carney has acknowledged that some financial sector activity would relocate to the EU “without question” following a Brexit.
In 2015, a survey by EY also found that access to the EU’s single market is a driving force behind foreign direct investment (FDI) into the UK, and the loss of market access could potentially affect net FDI flow.
The UK Treasury reports that leaving the European Union would result in up to a £36 billion reduction in tax receipts, which would “significantly outweigh any potential gain”.
Former CEO of ING Direct Vaughn Richtor will assume the role of chairman at MyState following the retirement of Miles Hampton, the compan...