UK financial services importance to EU detailed in post-Brexit partnership proposal

4 September 2018


The huge significance of the UK finance services sector to global trade –especially in the EU – is detailed in a new government proposal for a UK-EU post-Brexit financial services partnership.

The report says that, for insurance, European business represents 14 per cent of the London Market and 32 per cent of revenues for UK-based insurers in international and wholesale activity comes from EU clients. Activity from UK and  ‘Rest Of The World’ (RoW) clients comprises 68 per cent.

It adds that 25 per cent of revenues for UK-based asset managers comes from managing EU clients’ funds while managing funds for UK and RoW clients represents 75 per cent.

Meanwhile, British clearing house LCH, which has a 95 per cent global market share in interest rate swaps, clears 98 per cent of all euro-denominated interest rate swaps. A total of 24 per cent of LCH’s clearing is from EU participants.  

The report adds that the current interconnected market has significant benefits for businesses and consumers:

* UK-located banks underwrite around half of the debt and equity issued by EU companies.

* More than 95 per cent of euro-denominated derivatives are cleared on UK infrastructure. UK central counterparties, which clear derivatives, are the largest in Europe.

* On average, across the largest 5 EU27 MSs, 40 per cent of companies’ shares trade in the UK 5.

* The UK has the largest share (37 per cent) of global foreign exchange trading in the world. By comparison, France and Germany have three per cent and two per cent respectively.  /more...

* TheCityUK estimates that more than twice as many euros are traded in the UK than in all the euro-area countries combined.

* London is the world leader for specialty insurance, servicing unique insurance needs for European businesses, such as satellites, offshore energy products, and complex projects such as metro systems.

The report says: “The UK is host to all 30 global systemically important banks and is home regulator for four of them. The International Monetary Fund (IMF) has described financial stability in the UK as a ‘global public good’ and the risks of disruption to continued UK-EU co-operation have been recognised by the EU authorities.

“If mutual market access is lost, independent analysis indicates economic benefits from UK financial services activity relocating to the EU27 will be more than offset by negative fragmentation and lost efficiency impacts.”

The report proposes a two-fold UK partnership with the EU for financial services. The first is Autonomous Access to the market where  both parties retain autonomous judgment about market access and about legislation. The second is a Bilateral Economic and Regulatory Arrangement,  which would include commitments and processes ensuring transparency, stability and promoting cooperation.

The UK government document says that its proposal respects EU concerns and has a number of important benefits for both the UK and EU. It would:

* Ensure financial stability is safeguarded across Europe.

* Avoid market fragmentation which would harm European citizens and businesses.

* Ensure no UK cherry picking of rights and responsibilities


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