Britain crashing out of the European single market could cost banks and associated businesses in the U.K. almost 40 billion pounds ($51 billion) in lost revenue, undermining a key sector of the economy, an industry report warned on Wednesday.
Finance firms are making a fresh bid for special status in upcoming Brexit negotiations with the EU after U.K. government officials this week indicated banks will get no favors. The report, prepared by Oliver Wyman on behalf of TheCityUK lobby group, warns that almost 70,000 jobs and 10 billion pounds of tax revenue are at risk from a so-called hard Brexit, according to two people familiar with its contents.
Prime Minister Theresa May has ruled out prioritizing protection of the banks in Brexit talks and has dismissed their key business demand for an interim deal to help ease the transition out of the bloc, Bloomberg News reported Monday, citing three government officials. Finance executives have threatened to move jobs if Britain doesn’t secure a deal allowing them to serve European clients from London.
“A strong U.K.-based financial and related professional services industry is fundamental to a thriving economy,” TheCityUK Chief Executive Officer Miles Celic said in an e-mailed statement in response to the Bloomberg report on May’s stance. A positive outcome to negotiations “would be mutually beneficial to the U.K. and the EU, would cause minimum disruption to the industry and the customers it serves, and help to ensure financial stability.”
The U.K. financial services industry generates between 190 billion and 205 billion pounds of revenue annually and employs 1.1 million people, according to a draft of the report obtained by Bloomberg. The industry pays between 60 billion and 67 billion pounds in taxes each year.
A spokesman for Oliver Wyman declined to comment on the contents of the report.
The report details the impact of two different Brexit scenarios. If the U.K. is outside the European Economic Area but maintains ongoing access to the single market on broadly similar terms to now, then 4,000 jobs could be at risk. Such a move could cost the industry 2 billion pounds in lost revenue every year, resulting in a drop of 500 million pounds in tax paid to the U.K. Treasury.
At the other end of spectrum, if the U.K. loses all passporting rights, then 35,000 industry jobs could be on the line, along with 20 billion pounds of annual revenue and 5 billion pounds in lost tax receipts. The impact on the wider financial ecosystem of such an outcome could “almost double the effect of Brexit,” the report says.
Bank representatives are lobbying May and EU leaders to strike an interim agreement to allow banks in London to continue to provide services across the EU beyond the end of the two-year negotiation period for a Brexit.
“What we want is to have as full access to the single market as we have at the moment so that banks in the U.K. can carry on serving customers in the EU-27,” said British Bankers’ Association CEO Anthony Browne. “The top priority for the industry is getting agreement on a transition arrangement to make sure there is an orderly process and no risk to financial stability.”