LONDON – The finance and business ecosystem collectively dubbed the City makes close to £50 billion ($60.7 billion) from the European Union each year, government figures show.
A House of Commons briefing paper published on Monday shows that British banks, money managers, insurers, pension firms, consultants, accounts, and lawyers sold £48.8 billion-worth of services to EU countries in 2015, the most recent year figures are available for.
The figure is equivalent to:
- Over 50% of all services exported from Britain to the EU each year; Over 20% of all British exports to the EU; Almost 10% of all the UK’s exports globally.
The figures underline both the central importance of the City to the British economy and the importance of trade with the EU. Britain’s financial sector has the biggest trade surplus with the EU, selling £19.1 billion more to Europe than we buy from the continent.
There are fears that this vital trading relationship could be jeopardised by Britain’s looming exit from the EU. There are multiple potential pitfalls: a lack of clarity on a post-Brexit deal could drive finance firms to relocate elsewhere in Europe; a loss of passporting rights, which allow firms to sell services across the EU from the UK, could force a similar move; and a failure to agree a new trade deal within the two-year Brexit timeframe could see exports collapse as trade reaches a “cliff edge.”
Anthony Browne, CEO of the British Bankers’ Association (BBA), reiterated the need for a transition deal to ease the process of exiting the EU and allow the City to continue to trade with Europe while a permanent free trade deal is negotiated. The BBA represents over 200 banks and is the main trade body for the banking sector in the UK.
It’s essential that transitional arrangements are put in place to avoid sudden and damaging disruption – Antony Browne, BBA CEO
Browne told Business Insider: “It’s essential that transitional arrangements are put in place to avoid sudden and damaging disruption to services at both the point of exit of the UK from the EU and the point of entry into a new partnership.
“This is necessary from the outset in order to reduce the risk of businesses or banks taking decisions to relocate jobs and services out of the UK, in the absence of clarity on what a future relationship with the EU would look like.”
Browne warned in an article for the Observer last year that bankers’ “hands are quivering over the relocate button. Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.”
Theresa May hinted before Christmas that the UK will push for a transitional deal, appearing to reverse her earlier position. However, there is no guarantee that the EU will be willing to give Britain such a deal to ease the exit process.
Browne added that the government’s trade figures show that a transition deal is in the EU’s best interests too. He told BI: “All EU member states have a mutual interest in ensuring that the period between concluding the UK’s exit from the EU and any new relationship minimises disruption to businesses and customers.
“Including transitional arrangements in the UK’s withdrawal agreement under Article 50 would avoid a cliff-edge moment and ensure an orderly transition post-Brexit.”
While the £50 billion a year figure on its own is high enough, this represents just revenue earned by British-based financial and professional services firms. Links between Europe and Britain’s financial sector are far deeper, with the BBA’s own figures showing that UK banks hold over €60 billion of German deposits and have lent over €90 billion to German companies, for example.