Brexit deal must protect at-risk sectors of finance industry, think tank warns
The Government must focus on protecting the most valuable sectors of the finance industry as it negotiates a Brexit deal for the City, a think tank has warned.
Open Europe said the significance of EU passporting rules was exaggerated and has little value to some sectors, such as insurance.
The finance industry has raised concerns about the future of the passporting system, which allows UK banks, insurers and asset managers easy access to EU markets.
In a report published today the European affairs think tank said the Government must prioritise its negotiations on those finance sectors most at risk from uncertainty, such as banks.
Vincenzo Scarpetta, Open Europe's senior policy analyst, said: "The significance of the financial services passport depends on the industry. It is important to business in some sectors, but has much less value in others.
"To claim that the success of the UK as a global financial centre is entirely reliant on the passport is exaggerated.
"In the upcoming negotiations with the EU, the Government needs to focus its efforts on retaining or replicating a passport-like relationship in those sectors where it is most valuable."
The report also warned that the banking sector needs at least one year's notice of what access to the EU market will look like when the UK leaves the bloc.
"It is essential for the Government to avoid a cliff-edge situation," Mr Scarpetta said.
"The financial services industry needs maximum certainty on future trade arrangements with the EU as early on as possible in the negotiations.
"Firms have been planning for the worst, and some of them may start putting those plans into motion if uncertainty drags on for too long.
"The UK will need to convince the EU-27 that keeping financial markets open across the Channel is a matter of mutual interest.".
It comes after Sir Jon Cunliffe - the Bank of England's Deputy Governor for Financial Stability - told a House of Lords sub-committee that it would be "highly unlikely" in the short term that the capital's unique financial ecosystem would be recreated in Europe.
However, he said services could shift to New York because its finance industry has the same qualities as London.