Almost a third of City firms could leave the country if Britain loses its financial passport

LONDON — More than 30% of City workers think that their employer could move operations out of the UK once Brexit is completed, according to new report by Morgan McKinley.

The City recruitment consultancy surveyed roughly 5,000 people working within financial services and other service based professions, and found that 15% believe their employer definitely intends to move some or all operations out of the UK post-Brexit, while 16% think it is a possibility.

21% of those asked were “not sure” while 48% think that their firm will stay put, as the chart below illustrates:

“Recently, there has been a lot of concern around the threat of the UK losing passporting rights, with emphasis placed on the continued importance of freedom of movement for EU nationals. With this becoming a fundamental topic of the pending negotiations, when we surveyed if employers had any intention of relocating their business abroad (either in parts or in its entirety), almost half (48%) said no, whilst 31% said yes that was going to be the case or at least, there was a strong possibility that it may happen,” Morgan McKinley’s report says.

Of the 5,000 or so people surveyed by Morgan McKinley, 39% worked in banking or financial services, 36% worked in professional services, and 25% worked in commerce and industry.

A recent report from market insight firm Mlex, showed the enormous scale of passporting rights. 13,500 companies use financial passporting in some form in relation to the UK, Mlex found. All types of businesses from newspapers to removals companies, all the way to a body that represents acupuncturists work under financial passporting rights.

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.

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.

However, on Monday Prime Minister Theresa May hinted that Britain could seek some form of transitional deal to protect the City from the worst of Brexit. Asked about City worries over losing passporting arrangements, the prime minister told the Confederation of British Industry that “people do not want a cliff edge.”

Morgan McKinley’s research also showed just how much those working in the financial sector opposed Brexit, with 68% of those surveyed saying that the vote for Brexit “was not the right outcome.” Only a quarter of respondents — compared to the 52% across the country who voted for Brexit — said leaving the EU is the right decision.

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