The scale of disruption that Brexit could cause in the City of London has been revealed by figures showing that 5,500 UK-registered companies rely on “passports” to do business in other European countries.
More than 8,000 financial services firms based in the EU or the European Economic Area rely on single-market passports to do business in the UK, according to numbers from the Financial Conduct Authority released on Tuesday.
There is a growing fear in the City that once UK leaves the EU it will lose its passporting rights, which automatically grant access to other members of the single market in various sectors of the financial services. This allows companies to serve clients across Europe without having to win licences in individual countries.
“The business put at risk could be significant,” said Andrew Tyrie, the MP who chairs the parliamentary Treasury committee, which published the figures it received in a letter from Andrew Bailey, chief executive of the FCA.
“None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops,” said Mr Tyrie.
“No doubt the hard grind of establishing what best protects UK interests is already under way,” he added. “This issue needs to be right at the top of the in-trays of the chancellor, the governor of the Bank of England, and the UK’s lead negotiators.”
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The total number of passports held by UK firms amounted to 336,421, as many firms hold more than one for different sectors in different countries.
The passports cover a range of different activities, including investment banking, corporate lending, insurance, payments and asset management.
Many banks are still crunching the numbers on which parts of their cross-border operations would be most affected by the various potential outcomes of the negotiations for the UK to leave the EU.
But several senior banking executives and their advisers told the Financial Times recently that an early consensus was forming around a figure of about 20 per cent, or £9bn, for the amount of investment banking and capital markets revenue that faces disruption in the most extreme scenario.