With Brexit expected to have considerable affect on various sectors of industry, it is the struggling — with the slowdown in investment — financial services sector that needs a shot of confidence to mitigate the blow from UK’s exit. Even (just for argument) if the UK was now to stay in the EU, the damage to the financial services sector has been done.
As a result of uncertainty, indecision, and lack of strong leadership from any political parties, finance firms have been forced to undertake action in order to maintain their interests.
This usually means moving parts of their business or key employees to locations such as Paris, Luxembourg, Dublin, Frankfurt and Amsterdam, or establishing legal entities within the EU. In some cases, such actions have been carried out publicly. However, the full scope of the situation is unknown, as there are many cases that have not as yet been divulged.
Furthermore, with no meaningful access to the Single Market, Britain’s financial services sector is getting ready for what has the potential to be a lengthy, steady fall. Given that this sector makes up around 6.5 per cent of UK GDP, this will undoubtedly impact jobs and the government’s tax base.
As such, although the ongoing decline in investment, talent and activity in the UK financial services sector can be brought to a halt, and the situation may be recoverable, the real problem is the lack of confidence.
According to Nigel Green, founder and chief executive of deVere Group, which offers an array of financial solutions to clients which include international investors, expatriates and globally-minded individuals, confidence needs to be rebuilt in London’s financial district (known as the ‘City’).
Establishing robust rules for the sector will be key, he says. But more than this, to keep the City competitive and attract business to Europe’s second largest economy, he believes that the UK should move towards becoming the low-tax hub of Europe. Corporation tax could be cut to 15 per cent, income tax capped at 30 per cent, and tax breaks and state assistance for new businesses introduced. The list could go on.
Throughout the course of Brexit, the financial services sector has been insufficiently championed by the government. Politicians have long under-appreciated the importance of the City. The financial services sector needs to be supported in parliament, as it currently appears to have no strong group of allies in government, says Green. Financial services professionals were justifiably of the opinion that ministers would support their cause above other industries.
In contrast, the sector has been sacrificed to safeguard manufacturing and guarantee an end to freedom of movement from the EU.
Considering that the EU accounts for around 20 per cent of Britain’s financial sector revenues, with half relying on full access to the Single Market, the UK should focus on establishing rules and taxes to keep the City competitive, in line with other global financial hubs such as New York and Shanghai.
Consequently, with a Brexit extension period on the cards (now that the original March 29 deadline is out), the time has come to make a stand, support the financial district with strong, unified support in government and bold, pro-business policies which would restore the confidence lost as a direct impact of Brexit.
According to research by law firm Shakespeare Martineau, more than three quarters of UK businesses have put no additional funds in place to meet the costs of international recruitment following Brexit. As many as 26 per cent of businesses have already recruited fewer workers from the EU since March 2017.
Under government plans, low-skilled EU workers would no longer have an automatic right to work in the UK following Brexit. With free movement between the UK and EU to end, companies may face increased recruitment costs.
Head of business immigration at Shakespeare Martineau, Tijen Ahmet said: “Exploring other global talent markets is going to be increasingly important. However, this comes at a price.” Adding: “The current Tier 2 visa system for skilled workers is expensive and if employers find they need to use this system to plug gaps in their businesses, the costs could soon climb.” The cost of recruiting on a Tier 2 visa for a three-year contract in the UK is over £5,000 per person and can be significantly higher if the employee is joined by the family.
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)
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