Britain’s financial services sector must keep its unfettered access to the European Union’s single market after Brexit given that available alternatives don’t provide a sustainable long-term solution, an industry report said on Tuesday.
British Prime Minister Theresa May is due to launch formal divorce talks with the EU by the end of March, leaving banks, insurers, asset managers and markets wondering how they can serve customers on the continent in future.
Currently, they use an “EU passport” allowing them to operate across the 28-nation bloc from a base in Britain.
The International Regulatory Strategy Group, made up of financial and professional services firms operating in Britain, said the sector should be “prioritised in the forthcoming negotiations” given its importance to Britain’s economy.
“This must include securing continued access to the single market on terms that resemble those currently in operation as closely as possible,” the report seen by Reuters said.
The report is due to be published later this month and has been written in collaboration with lawfirm Hogan Lovells.
It looks at alternatives to passporting, a nod to how many in the sector now believe there is no realistic chance of maintaining full passporting rights after Brexit, and that some banks will begin moving operations to the continent as soon as this year.
EU leaders say access to the single market can only be granted in return for accepting the free movement of EU citizens and complying with rulings from the bloc’s top court, both of which are unacceptable to many of those who voted for Brexit.
Alternatives to passporting mainly include “third-country regimes” or TCRs, whereby the EU allows British financial firms to serve continental customers on condition they abide by rules similar to those in the bloc.
“Only a very small proportion of financial services which are currently covered by the passporting regime are the subject of TCRs,” the report said.
Britain may end up being “something of a rule taker, that is having to implement changes in its own law to follow changes in EU law,” it added, reiterating pitfalls and recommendations that other industry reports have already highlighted.
“Taking the above issues into account, the most favourable solution is likely to be for the UK and EU to enter into a bespoke agreement allowing mutual access to each other’s markets.”
(Reporting by Huw Jones; Editing by Keith Weir)