What would EU exit mean for UK financial services?

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MPs have clashed over what the impact on the financial services industry would be of the UK leaving the European Union.

In a report published last week, shadow Europe minister Pat McFadden warns that firms could face a less flexible process for complying with EU financial services rules if the UK were to leave the union.

He also argues that exiting the EU would leave the UK in a “substantively weaker trading position”.

In the event of an exit the UK could either follow Norway, which is part of the European Economic Area, or Switzerland, which is not but has bilateral agreements with the EU.

But McFadden argues that the UK would still have to contribute to the costs of the single market and would have to ensure its rules aligned with Europe’s to some extent.

In the case of Switzerland, McFadden argues that Swiss regulators “have less room to exercise their discretion in a way that varies from what the EU Commission thinks is appropriate than financial servicers regulators such as the FCA have within the EU.”

Ukip financial affairs spokesman Steven Woolfe says: “The EU needs the UK’s skills, scale and expertise in these markets as much as we want out our firms to trade profitably there.

“But the unintended consequences of blanket implementation of coming EU laws can be avoided.

“Anyone who thinks Britain has influence today on the EU’s economic and monetary affairs committee which formulates these regulations is truly misguided. We’re better off out.”

Campaign group Vote Leave spokesman Robert Oxley describes the report as “scaremongering”.

He says fears that Britain would still have to implement EU laws but without the ability to steer them overstate Britain’s present influence. He cites as examples the planned EU bonus cap and the financial transaction tax, proposals that the UK has opposed.

Wealth Management Association deputy chief executive John Barrass says: “We should be very careful about expecting a beautiful golden world, not least because we have led a lot of EU regulation.

“We might hope for more sensible regulation were we to leave the EU but please don’t think it will mean less regulation.”

A late 2014 survey by Apfa found that 33 per cent of advisers have at least one client overseas. Only 25 per cent said they hold regulatory passports to deliver cross-border advice.

Apfa director general Chris Hannant says: “Those advisers might just decide to deal with those clients when they come back to the UK. It might just be that advisers change the terms of how they deal with overseas clients.

“Much will depend on what the actual proposition is. After all, that might affect whether all those ex-pats remain overseas at all.”

Adviser views

Peter Chadborn, Director, Plan Money

It could be out of the frying pan and into the fire if the UK is constantly having to prove equivalence, because it’s not clear yet what that will actually entail.

Most advisers have two or three clients that live overseas but have residence in the UK, but I don’t know that this issue is on advisers’ radar.

Ian Lowes, Managing director, Lowes Financial Management

Stepping away from the EU would have some benefits and some negatives, and it might be 20 years before we fully understand what the unintended consequences will be.

Either way, all I see is increasing regulation and I don’t think that’s going to stop.