LONDON — The City’s economy and those of the remaining member states of the European Union will be mutually damaged if Britain does not secure a “workable” Brexit deal, according to a leaked report seen by The Guardian.
The Guardian claims to have seen a report written “by officials working for the European parliament’s powerful committee on economic and monetary affairs.”
UK-based financial services account for 40% of Europe’s assets under management and 60% of its capital markets business, so a bad deal for London would result in a bad deal for the rest of the EU, according to the report.
“UK-based banks provide more than £1.1 trillion of loans to the other EU member states,” says the report.
“If financial services companies choose to leave the UK as a result of Brexit, the consequences should be carefully evaluated. A badly designed final deal would damage both the UK and the other 27 EU member states.
“The exclusion of the main European financial centre from the internal market could have consequences in terms of jobs and growth in the EU. It is in the interest of EU 27 and the UK to have an open discussion on this point.”
You can read The Guardian’s full report here.
The loss of passporting rights following Brexit is one of the biggest fears in the City of London and seems almost a certainty under May’s “hard Brexit” plan.
If the passport is taken away, London could cease to be the most important financial centre in Europe, costing the UK thousands of jobs and billions in revenues. Around 5,500 firms registered in the UK rely on the European Union’s passporting rights for the financial services sector, and they turn over about £9 billion in revenue. There has been a surge in applications for Irish passports following the UK’s vote to leave the European Union.
The report reflects the recent comments from one of the world’s biggest bank’s CEOs.
Goldman Sachs CEO Lloyds Blankfein recently told Prime Minister Theresa May that her plan to drag Britain into a “hard Brexit” will clear the path for other cities to take away London’s role as Europe’s financial centre.
Blankfein told May in a private meeting at the World Economic Forum this year, “there was no reason why European financial centres can’t set up as effective rivals.”
This is unless the “government gives more priority to the City in Brexit negotiations.”
On January 17, May outlined her negotiating stance for Brexit , which included a rejection of the single market and an end to the free movement of people, resulting in a so-called “Hard Brexit.” This would likely have the result of stripping the City of its passport.
Another report last month said that Goldman Sachs, which employs around 6,000 people in Britain, it was considering cutting its staffing numbers in London by up to 50% due to Brexit fears.
It said that the bank also plans to shift 1,000 people to Frankfurt and set up a new European subsidiary as it prepares for the UK to leave the European Union. Goldman is also reportedly considering moving operations staff to Warsaw and New York, reducing the number of people in London by 3,000.