The City of London’s powerful lobbying group has reluctantly given up on its lobbying efforts to keep full access to the EU, a sign which is being interpreted here as a further signal that the UK is heading for a hard Brexit that would be bad for the Irish economy.
Business group TheCityUK yesterday called for limited market access for some finance sectors based on a pact in which the UK and the EU would accept each other’s rules.
Such an “equivalence” arrangement would keep the door open for cross-border trading of stocks and bonds, and sales of certain other products.
Irish experts said Ireland could benefit but only on the margins if London were to lose the automatic right to sell financial services across the remaining EU countries — a process known as passporting — when the UK completes its separation talks with Brussels.
Some benefits could accrue to Ireland because potentially it increases the lure to attract UK and international banks and insurance firms to these shores who will want to continue to sell across the EU without hindrance after the UK’s departure.
However, the costs that a hard Brexit entails to the Irish economy as a whole, and in particular to trade in agriculture and food products, would be substantial.
And Ireland would still face competition from large continental centres, including Paris and Frankfurt, for the UK financial firms which do decide to shift their bases.
UK-based banks, insurers and asset managers have now concluded there is no realistic chance of maintaining full passporting rights after Brexit that would allow them to sell all their services across the EU.
TheCityUK document is the first attempt to condense the industry’s priorities after months of conflicting lobbying and comes just two months before Britain plans EU divorce talks.
“I am confident that this represents in broad shape the key priorities for the industry,” TheCityUK chief executive officer Miles Celic told Reuters.
“There are a multiple number of documents out there of stuff at significant length. So there was a sense among our membership to filter down what the key asks were into a single place,” he said.
The future of London as Europe’s financial centre is one of the biggest issues in Brexit talks because it is Britain’s largest export sector and biggest source of corporate tax revenue.
Viewed from Ireland, the City of London’s decision is “a bit of a surprise” and does represent a shift of tactics for the huge UK financial services industry, said Philip O’Sullivan, chief economist at Investec Ireland.
He said that the City of London had hoped to secure full rights to sell its services after Brexit.
Mr O’Sullivan said that Ireland’s abilities to attract financial services firms to set up here may be boosted but he also said Ireland sells a significant amount of financial services to the UK under current full access arrangements that would be disrupted if London fails to secure full access when the UK departs.
“It is harder to see benefits for the wider economy,” he said.
John O’Leary, tax partner at PwC, said Brexit will be bad for Ireland overall, but it does give rise to “some opportunities” such as attracting financial services firms if the UK were to lose full passporting rights.
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