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Beyond Brexit: future of financial services in the UK

Data taken from an EY poll of up to 500 senior management representatives from global financial services firms with business interests and/or a presence in the UK market in January 2020 has revealed what the financial services landscape may look like in the country following its exit from the European Union.

Sixty-one per cent of financial services firms believe that their UK presence will not change post Brexit, although 27% are more positive and plan to expand their UK business. Just 12% plan to reduce their presence in the UK market.

Relocation plans

In terms of necessary staff moves to the EU, just over a quarter (26%) of respondents claim their firm is still to relocate roles. However, of that, only 3% claim there will be ‘significant’ relocation numbers, with 23% saying only a ‘few’ further moves will take place. The majority (74%) of respondents claim there are no further EU staff relocation plans.

“While the industry does not expect the UK market to shrink as a result of Brexit, and a number of firms are in fact progressing with growth plans, nothing is set in stone," commented John Liver, UK Financial Services Partner at EY. "In terms of the relocation of staff to EU hubs, many of the moves to the continent have already happened, and as we know, the numbers to date have been smaller than many forecast over four years ago. But our poll does show that over a quarter of respondents do still believe some staff need to move."

Establishing equivalence

Over three quarters of respondents believe that the EU will grant limited equivalence determinations in the ongoing post-Brexit talks, with just 8% expecting a temporary MiFIR Article 47 determination. A minority (15%) do not believe there will be any further equivalence determinations granted by the EU.

“For financial services firms, the uncertainty didn’t end with the Christmas Eve deal," Liver added. "While firms have generally done what they needed to serve their international clients, the hard yards are still to come on the longer-term relationship as both sides discuss equivalence and a framework for regulatory cooperation (due in March). Firms must continue to focus their attention on the many moving parts that will make up our long-term cross border financial services trading environment, which will remain fluid over the next few years. They will need to work on understanding the different financial services regimes country by country across the EU, and set up processes and controls accordingly, all alongside the necessary immigration requirements. But they also now need to think strategically and lay the groundwork for their future footprint, legal entity and operating models."

Deal done

With a Brexit deal now done, many firms are conducting strategic reviews of their European business, and according to the poll, 66% of respondents believe their firm should conduct one.

“While uncertainty prevails, overall, the message is that London will remain a global financial powerhouse, and it is positive to see that firms are looking forward with renewed energy, strategically reviewing their business and making plans for the new opportunities that lie ahead,” concluded Liver. 

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