At the beginning of December we carried out research which focussed on the impact on financial services. Smaller companies don’t have the resources to do this; they could not open another office on the off chance that they would need it, so Brexit put them in a more vulnerable position. All Rights Reserved. LONDON — Brexit isn’t over for financial services, the crown jewel of the U.K. economy. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. Regulators in Britain and the European Union reach an agreement to avoid disruption in cross-border asset management even in … EY is a global leader in assurance, consulting, strategy and transactions, and tax services. The Christmas Eve Brexit agreement delivered an unfair market for UK companies in the Financial Services Sector. “The focus for financial services firms now will be on what can be achieved through trade deals and regulatory cooperation with key financial services hubs across the world. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. Some 43% of the 222 financial services firms surveyed have moved or plan to relocate some UK operations or staff to the EU, taking the total number of Brexit-related job moves to almost 7,600. Financial services made up 6.9% of the UK’s total output in 2018 and contributed £29 billion in tax in 2017/18. This is a unique moment for the Government to modernise the trade and migration interplay and press ahead with earlier made plans to enable broader worker mobility between the EU and the UK. In this insight, Matheson's Financial Institutions Group considers the limited treatment of financial services in the Brexit Deal and what that means for financial services firms now and into the future. The deal meant we were left in a situation where EU-based banks wanting to buy European shares cannot trade via London. Newsletters with Secrets & Analysis. These different versions of post Brexit UK financial services are not necessarily mutually exclusive. FCA issues advice on financial services as Brexit trade deal agreed By Oliver Rowe. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. It has been reported that there are ongoing talks to harmonise rules over financial regulations (equivalence) and that they’re working towards a March deadline. Within clearing, banks will be particularly keen to understand the outlook that will follow the temporary conditional equivalence decisions deadline. How the UK economy can stay resilient into the post-pandemic future, Why it’s a defining moment for climate change – and the time to act is now, How EY collaborated with the NHS to set up a new field hospital, Senior Manager, Media Relations, Financial Services, Ernst & Young LLP, Media relations specialist. Over the Valentine’s weekend, it was announced that during January, the first month that the new Brexit-related changes came into force, Amsterdam overtook London as the largest financial trading centre in Europe. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. You can already see evidence of EU companies, particularly those based in Amsterdam and Germany, eyeing up the UK market. FinTech, in particular, has been a UK success story. Once the UK had confirmed its intention to leave the Single Market, the EU explicitly ruled out sector-specific arra… What the Financial Services Sector urgently needs is a fair regulatory framework and marketplace in which UK business can operate. EU shares that were previously traded in the UK have moved to the EU on advice of the European regulator. However, there is almost nothing in the TCA on financial services. Overall, 57% of companies believed that Brexit would have a negative impact on their business, and some (6.6%) believed it would destroy their business. At Amaiz we have worked hard to understand the implications of Brexit. This vibrant scene is looked on with some envy and I’m very proud to be part of it. Until then we are in ‘war’ mode. As a priority, firms need confirmation about whether they can continue to share data internally within their own organisations and with third parties without breaching the rules in any of the countries they operate in.”. “The transition deadline was agreed before the onset of the pandemic could have been foreseen, and with the added difficulty of COVID-19 restricting movement to and within many European countries, there are deeply practical physical barriers in addition to the significant strategic challenges to overcome. London cyclist, social organiser, loves to shop and mama to two strong girls. And they remain fundamental today. The Brexit deal leaves the future uncertain for financial services — here’s what is at stake Published Tue, Jan 5 2021 2:45 AM EST Updated Tue, Jan 5 2021 5:24 AM EST Joumanna Bercetche Seema Farazi, UK Financial Services Immigration Leader at EY, comments: “The movement of people was always likely to be ‘deal agnostic’. Customers should also be aware of any changes that may apply to them. But, the broader, more long-term talent concern is the potential long-term loss of top UK expertise to other European markets and vice-versa.”. Before the latest lockdown restrictions, we saw a flurry of final moves to ensure rights of residence were properly established by the cut-off, particularly as many in the sector have been working from alternative locations during the pandemic lockdowns. “Outside of the lack of clarity on regulatory equivalence or cooperation, the most important topic for financial services firms is going to be data, not least to avoid payments disruption and to ensure regulatory compliance across markets, where fines levied can be huge. Some of his senior bankers were not so optimistic. We also use third-party cookies that help us analyze and understand how you use this website. London has been the unrivaled king of European finance for more than three decades. Larger companies in Financial Services prepared for Brexit by registering companies and offices within the EU so that they could continue trading there. Brexit Statutory Instruments tracker. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Comuniq.EU – Brexit / Financial Services. Global economy and markets; As the UK and the EU agreed a post-Brexit trade deal on 24 December, the UK’s Financial Conduct Authority issued guidance for financial services firms in order for them to prepare for the end of the transition period. Omar Ali, UK Financial Services Leader at EY, comments: “After four testing years of negotiations, financial services firms will be relieved that a deal has finally been reached ahead of the transition period deadline. In November 2020, he said that “Financial services have been fundamental to Britain’s economic strength for centuries. Talks are still outstanding with the EU, Britain's single biggest export market for services. Since late December 2020 and in the two months since the Brexit deal, 10 financial services firms have publicly urged the UK Government and regulators to ensure that the UK sector remains competitive and open for business. The Bank of England chief Andrew Bailey has warned that there are signs that the EU plans to cut off the UK from its financial markets and has urged them not to do so. IP Completion Date This table sets out the Brexit SIs that amend onshored retained EU legislation and will come into force at the end of the implementation period (IP Completion Date). This is not to be considered as financial advice and should be considered only for information purposes. Key policy work is still to be done both in the UK and the EU, and so in many respects the waiting game continues. That’s likely to due to their ability to devote resources to solving the challenges Brexit presents. The FCA found that 59% of smaller financial firms expected that their profits would take a hit this year[1]. [1] https://www.reuters.com/article/us-health-coronavirus-britain-markets/up-to-4000-financial-firms-could-fail-due-to-covid-says-uk-regulator-idUKKBN29C0R7?edition-redirect=in, [2] https://www.fsb.org.uk/resources-page/at-least-250-000-uk-small-businesses-set-to-fold-without-further-help-new-study-warns.html, Five things shaping Britain’s financial rulebooks after Brexit, Bitcoin tumbles 17% as doubts grow over valuations. This category only includes cookies that ensures basic functionalities and security features of the website. This system is known as passporting. For many financial services firms - which operate digitally and employ significant numbers of people - the agreements on data and migration will be as important as the detail of the agreements on financial services itself. Chancellor Sunak has made clear that financial services are central to the UK’s overall post-Brexit and post-Covid economic strategy. By Steve Taklalsingh, MD UK Business, Amaiz. We use cookies to enhance your visit, personalise our content, social media features, ads & to analyse our traffic. Before the latest lockdown restrictions, we saw a flurry of final moves to ensure rights of residence were properly established by the cut-off, particularly as many in the sector have been working from alternative locations during the pandemic lockdowns. The Government has worked hard to find ways to help small businesses survive the pandemic in order to save jobs. “Today’s deal confirms many business’ concerns around mobility in a post-Brexit world and signals the end to the previous mutual recognition of professional qualifications and experience. The UK has set out its intentions for equivalence, but without agreement on both sides, there are fundamental questions yet to be answered. The British people voted to leave the European Union (EU) – a momentous decision signalling significant change in the UK, Europe and further afield, for businesses, consumers and the wider economy. Facebook Twitter LinkedIn Pinterest Stumbleupon Email. Does the deal include financial services? With one week to go until the end of the Brexit transition period, the FCA is urging financial services companies to ensure they are ready. EU’s financial services chief says realities of Brexit ‘have come home to roost’ ... Friday January 22, 2021 12:45 pm. Most companies had been preparing for Brexit for some years. Only 17% of companies said they had failed to prepare. UK policymakers must now look ahead, towards how we continue to create the strongest future for UK financial services.”. Comuniq.EU – Brexit / Financial Services. These cookies do not store any personal information. Number 10 has said they are open to discussions on the equivalence issue and claims that the Government has ‘supplied the necessary paperwork’ and boasts of the UK’s strong regulatory system. Since the UK voted to leave the EU, financial services has been largely absent from Brexit discussions. Our recent poll found that the majority of respondents (74%) currently believe that the EU will grant further equivalence determinations, but that they will be limited in scope. 1. While many of these moves have already happened there will be some firms that are lagging, and guidance from regulators in the UK and the EU will be helpful in the short-term. Whilst there were some that hoped and campaigned for the referendum result to be overturned, that seemed unlikely. How has Brexit impacted U.K. financial services so far? Financial services — a key driver of the British economy — were largely omitted from the last-minute Brexit trade deal agreed between London and Brussels in late December. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. You also have the option to opt-out of these cookies. Public statements include calling for an operating environment that is accessible to both local and international trade and services businesses, and … Irrespective of the outcome of the negotiations between the UK and the EU on a free trade agreement, firms will need to be prepared for … And last but by no means least, is the regulatory cooperation around the supervision of large groups and global policy forums on key topics like the digital and green agendas. EU regulators want certain business currently conducted in London to take place in the EU. Our website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. 2nd August 2020 17th September 2020 1 Min Read. Hence, since 1 January 2021 … Since the … Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. remember settings), Performance cookies to measure the website's performance and improve your experience, Advertising/Targeting cookies, which are set by third parties with whom we execute advertising campaigns and allow us to provide you with advertisements relevant to you,  Social media cookies, which allow you to share the content on this website on social media like Facebook and Twitter. As expected, there is little relating directly to financial services firms in the deal, but tariff-free cross border trade in the real economy from 1 January 2021 is really important for their SME and corporate clients. Before the Brexit referendum in 2016, Axel Weber, the chairman of UBS, predicted that if the UK voted to leave the EU it would be able to negotiate pretty much the same market access rights for financial services as it already enjoyed. “It is essential that key functions such as risk and finance have been established in an EU hub if they are to operate without disruption. The results of our research in December showed that people were as ready as they could be: The changes that company leaders believed would have the most impact were those to regulations (37.4% of respondents said this was a concern), increased costs of doing business (37.2%), and reduced access to suppliers (35.5%). This would impact market efficiencies and the global competitiveness of financial services businesses operating both in the EU and the UK. How the Brexit Agreement Failed the Financial Services Sector, Analysis: Wealth managers frustrated over bitcoin, anxious for piece of the action, EU finance chief says UK's Northern Ireland move a breach of trust, The Benefits of Starting A US Non-Profit: The Latest Tax Regulations. And London’s place as Europe’s banker — already challenged by quitting the EU's single market — is under threat from the slim provisions of its Brexit trade deal with Brussels. Reading Time: < 1 minute. Press release issued 13:45 on 24 December 2020. Our findings gave us valuable insight into the deal that was needed for Financial Services. … With freedom of movement across the EU soon to stop for UK nationals, cross border working and business travel will need to take a different shape and break a 40-year habit. The table also provides details of key UK financial services legislation to be amended by each SI. Approximately €9.2bn (£8.1bn) worth of shares were traded on Amsterdam’s exchanges each day in January, against €8.6bn in London. The economy is experiencing an unprecedented recession, with all hopes laid on a swift bounce back as soon as lock down ends. This will include regulatory engagement to prepare for a ‘landing slot’, which involves significant preparation for quarter-end and annual reporting requirements once authorised, and the establishment of new operations to support third country branch obligations. Brexit is starting to change that. Equivalency isn’t just about access; it’s about the cost of doing business. The extent to which cross-border access will be permitted through equivalence determinations or through country-by-country policy, in particular for wholesale securities businesses. John Liver, UK Financial Services Regulation Leader at EY, comments: “Financial services firms will now be turning their attention to the strategic UK-EU regulatory decisions that still remain unresolved. “Within financial services we know that over 7,500 people are planning to relocate to the EU as a result of Brexit. Just 17% believe any announcement on equivalence would include a temporary MiFIR Article 47 determination. Please refer to your advisors for specific advice. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Those employing between 1 and 10 people were most concerned about increased costs (45.7%) and those with between 11 and 50 employees about taxes and VAT (41.3%). Brexit, CDPRO, Comuniq.EU. Share. The U.K.-EU Brexit deal provides no new transition period for financial services, nor any new arrangements to replace the existing “passport.” This… We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. This remains true despite the deal today. Copyright © 2010-2021 GBAF Publications Ltd - All Rights Reserved. “Cross-border remote workers who do not have the right regulatory and immigration permissions will in many cases need to ‘down pens’ regardless of the deal. Necessary cookies are absolutely essential for the website to function properly. The European Union’s financial services supreme has said a financial services deal between the UK and EU could take a long time to come to fruition. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. The Brexit deal for the Financial Sector. Throughout the transition period, compliance functions in U.K. financial services firms have been anticipating and, wherever possible, preparing for operational compliance post-Brexit. Review our cookie policy for more information. Luxembourg: Hard Brexit For Financial Services 18 January 2021 . This won’t come without compliance risk. There are four main areas of focus now for financial services firms: “For EU firms operating in the UK, the Temporary Permissions Regime (TPR) will be welcomed, but significant preparation is still required. How did that happen and why is Brexit to blame? Financial services firms are likely to continue to incrementally move staff and assets to the EU, in the wake of Brexit. The FCA (Financial Conduct Authority) and FSB (Federation of Small Business) both published figures in January that show the terrible impact of the pandemic on SMEs in the UK. Banks and fund managers have relocated £1.2 trillion of assets to the EU from the U.K. following the 2016 Brexit vote, and more than 7,500 jobs have left the country in the same period, according to accounting firm Ernst & Young. Originally published 13/01/2021. “For financial services firms – one of the UK’s biggest exports - the end of the Brexit transition period is just one milestone. This acted as a fail-safe solution that avoided issues, whether a deal was struck or not, and whatever the nature of that deal. A lack of equivalence decisions would increase the cost of doing business for financial services firms and the clients they serve. “The UK Government recently announced its intentions on equivalency, but this has not yet been reciprocated by the EU. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. But opting out of some of these cookies may affect your browsing experience. But providing clarity on how domestic regulatory control will be used alongside the terms of future single market access for UK financial services firms will likely shape post Brexit financial services in the UK more profoundly than the TCA. Both are significant concerns, especially if the UK continues to sit outside the safe-list for travel into January 2021, although these rules are typically decided country-by-country. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. The Christmas Eve Brexit agreement delivered an unfair market for UK companies in the Financial Services Sector. Brexit, Covid-19 and overseas competition are challenging fintech's future, and Britain should act to stay competitive for the sector, a government-backed review said on Friday. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Around 43% of financial services firms in the UK, 95 out of 222, have moved or plan to move their operations or staff to Europe, according to EY’s Brexit Tracker. The deal meant we were left in a situation where EU-based banks wanting to buy European shares cannot trade via London. In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. Of course, Brexit came at a time when we were all trying to manage the devastating impact of the pandemic. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. “For UK nationals looking to work in the EU one of the key challenges will be navigating so many new regulations, some of which will be positive, such as the UK-Swiss Mobility Agreement, others less so. Brexit and the failure of any deal on regulatory equivalence has created a "tense" relationship that will affect UK financial services companies, a specialist has warned. Subscribe Now. Single Market rules allow financial businesses authorised in any Member State to operate freely across the European Economic Area (EEA). In a recent EY poll of senior management within UK financial services firms*, almost all respondents (96%) claimed that not having a deal would cause the sector to shrink, so today’s announcement is certainly positive in that regard.
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