The potential loss of Britain’s so-called “financial passporting” rights once the UK leaves the European Union will have a widespread impact on the whole of Britain, and not just banks and insurance companies, research from market insight firm Mlex shows.
Mlex obtained a full list of all 13,500 companies using financial passporting in some form in relation to the UK, and found that all types of businesses from newspapers to removals companies, all the way to a body that represents acupuncturists could be hit if Brexit causes the loss of the financial passport.
The passport is essentially a series of interconnected pieces of legislation that allow financial institutions to operate across borders in the EU with few restrictions.
Current EU law allows European institutions to operate branches in the UK that do not need to be separately capitalised from the parent company abroad. Similarly, non-EU companies, such as those from the US or Asia, can use their London subsidiary to sell services to clients across the EU. This has allowed London to act as a major global hub for financial services firms in particular.
However, as Mlex — which obtained the data via a Freedom of Information Act request — shows, the passport covers much more than just financial services companies. Below are three examples of the non-banking institutions to hold passporting rights:
- The Society of Auricular Acupuncture — A body representing acupuncturists, the SAA holds passporting rights with regards to insurance.
- Telegraph Media Group — The publisher of the Daily Telegraph has an insurance-brokerage passport.
- U-Hire — A construction plant rental company facilitating digger rentals also has an insurance-brokerage passport.
The use of the “passport,” which allows firms in London to access the EU single market of 28 nations (including the UK), could be one of the rights the UK loses in the British exit from the EU. It is now looking increasingly likely that passporting rights are going to be a huge issue of contention in any Brexit negotiations.
In September, the chief of Germany’s Bundesbank, Jens Weidmann warned that the UK won’t get a special deal from the EU on the passports, and will need to allow free movement of citizens from EU nations, if it wants to keep them.
Weidmann told The Guardian that “passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area.”
It is most likely that the passport would be lost if the government opts for a “hard Brexit” — Britain leaving the European Union without access to the Single Market.
The government is reportedly placing little importance on retaining passporting rights, prioritising controls on immigration, and global trade deals ahead of keeping financial services in the country.
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