40 years: Executive leadership & banking
In this video of the series, Sir Mark Boleat discusses the impact of Brexit on the financial services market and, specifically, the impact to the city of London.
In this video of the series, Sir Mark Boleat discusses the impact of Brexit on the financial services market and, specifically, the impact to the city of London.
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13 mins 43 secs
Brexit has impacted the financial services industry on multiple levels, from influence over EU regulation to employment. In the short term, impact has been minor on the financial markets as many businesses have planned for relocation in the event of Brexit. Although, the impact has been significant on the businesses themselves as resources have been diverted towards Brexit planning. In the long term, the extent of the impact on the British economy will be dependent on the accessibility of the EU single market.
Key learning objectives:
Explain the short and long term impacts of Brexit on the British economy
Outline how Britain has previously been able to influence EU regulation
Explain the impact of Brexit on individual businesses
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There has clearly been a risk that Britain’s departure from the European Union would have a disruptive effect on financial markets. However, in practice it seems unlikely that this will be the case. This is because:
The UK has been very successful at influencing EU regulation over the last 30 years through a combination of:
Immediately after the Referendum this influence diminished as there is less capacity, and indeed willingness, for Britain to have an influence, and less willingness to give British views the same weight as they previously had.
There has been a diversion of resources away from strategy and business development to dealing with Brexit. Large project teams have been put in place in major companies, aided by consultancy and legal support. Staff who were previously working on expanding the business are now working on protecting existing business. This will feed through to profit and loss accounts, although it will not be possible to identify precise figures.
However, it is known that major banks have individually spent over £300 million on Brexit plans and the cumulative costs runs into billions.
The longer-term impact of Brexit on the financial services industry in the UK is unknown. It depends partly on the future trading relationship between Britain and the EU, although there is little expectation that this will be anything other than “normal third country status”. However, there may be some useful mitigating measures such as grandfathering clauses that will facilitate a more orderly shift of business from the UK to other centres.
The alternative scenarios were analysed in a report commissioned by TheCityUK from the Oliver Wyman consultancy in 2016.
Best case scenario:
Worst case scenario:
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