A new report from think tank Centre for European Reform has warned that the U.K.’s financial services exports to the European Union could be more than halved as a result of Brexit.
Reports in Bloomberg Friday (Dec. 7) said the think tank predicts that even a free-trade agreement could lead to a 59 percent reduction in the U.K.’s financial services exports, while exports of insurance and pension services could drop by 19 percent. Law and accountancy services are predicted to decline by 10 percent.
The U.K. exports an estimated $30.1 billion worth of financial services to the EU every year — that figure could be slashed to $12.5 billion in the event of a post-Brexit free-trade agreement, analysts said.
“Any arrangement that sees the U.K. leave the single market will inevitably lead to new barriers to services exports from the U.K. to the EU,” said Sam Lowe, author of the Centre for European Reform’s report. “The impact of these barriers will vary by sector, with highly regulated industries, such as financial services, being more affected.”
Lowe added that there will be additional knock-on consequences of this drop in FinServ exports, including “negative consequences for jobs.”
“While these consequences are unfortunate, if the U.K. is to extricate itself from the single market, they should be viewed as an inevitable consequence of British political decisions,” he added, according to Bloomberg, which noted that the think tank describes itself as “pro-European but not uncritical.”
Previous research estimated that Brexit has already negatively affected financial industry jobs in the U.K. Morgan McKinley released data earlier this year that found a 37 percent decline in the number of financial services jobs in London alone, citing Brexit as the main factor behind the slump.
The impact Brexit may have on the financial services sector has become a focal point for analysts and experts hoping to better prepare the global markets for the event in March. Major banks including UBS, Deutsche Bank and Credit Suisse have begun to shift staff out of London in anticipation of Brexit, while some FIs, including RBS, are creating special funds to support companies that could be affected by Brexit, like small businesses that may see a negative impact to their supply chains.