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Insight
Title:
Brexit could weaken the UK financial services sector
Description:

On 23 June 2016, Britain voted in a referendum to exit the European Union, and subsequently exited.

In 2023 we continue to argue about whether it has been a success or not.

Any trade and other arrangments negotiated during (or after) that period, must be agreed with at least 20 of the EU nations representing at least 65% of the EU population.

The implications for the UK Financial Services Sector are many:

  • Political turmoil: The resignation of David Cameron has led to a revolving door of prime minister including Theresa May, Boris Johnson, Liz Truss and now Rishi Sunak.
  • Economic: The BoE has estimated that Brexit has cost the UK more than COVID did. Oliver Wyman had estimated that as much as 25% of U.K. Financial services profits could be EU linked. However, all estimates are hotly contested.
  • Regulatory: It is estimated that 55% of the UKs laws (about 80,000 pages) derive from Europe and will have to be resolved. This will detract legislators and parliament from other work in the sector (see below), and will also divert private resources from other strategic initiatives. The FCA has already issued a statement advising firms that the all regulations remain in force and that they should continue to work on complying and/or implementing them whether or not they derive from Europe. In the longer term, however, we might expect direct impacts on:
    • Pensions reform
    • LISA
    • Any recommendations which may arise from the Dormant Asset Commission
    • The Financial Advice Market Review ("FAMR")
    • Regulatory passporting: there are apparently 8,000 firms who rely on some form of passporting.
    • UK legislative programmes, which might get deprioritised:
    • UK regulatory programmes, which might get deprioritised:
    • EU specific directives, such as:
    • Regimes dependent on EU membership, such as:
  • Labour: Brexit ends freedom of movement between the UK and the EU (in both directions).

From Twitter.

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PESTEL:
Political
Five Forces:
Threat of substitutes

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