More EU financial firms ‘passport’ into UK than sell out of it

Thousands more European Union financial services firms use “passporting” rights to sell into the United Kingdom than vice versa, according to figures highlighting the sector’s web of interdependent ties as Britain prepares to leave the bloc.

Under EU law, financial services firms can use those rights to operate across the bloc while being primarily regulated in their home market, allowing firms based in the City of London to trade in mainland Europe without major extra compliance costs.

Britain runs a large trade surplus in financial services, prompting concern that its firms’ access to EU markets could be restricted as other countries prepare to attract business after Brexit. But figures released on Tuesday by a British parliamentary committee show that, in terms of numbers of firms involved, more passports are used to sell into Britain than to sell abroad.

Insurance and securities

According to the figures compiled by sector regulator the Financial Conduct Authority, 5,476 UK-regulated financial firms use passporting rights to operate in other EU countries. Meanwhile, 8,008 EU firms used them to sell services in Britain. Most of the 13,484 firms on both sides sell insurance or trade financial securities.

“Efforts to secure an appropriate arrangement for UK-based firms will be one of the most challenging aspects of the negotiations about the UK’s future relationship with the EU,” said Andrew Tyrie, chairman of the British parliament’s treasury committee.

“None of the current off-the-shelf arrangements can preserve existing passporting arrangements while giving the UK the influence and control it needs over financial services regulation as it develops,” he added.

British chancellor of the exchequer Philip Hammond has argued that a post-Brexit attempt to shift financial services activity from Britain to the EU would damage European businesses that rely on London as a hub, and see business move to New York or Asia. – (Reuters)