The post-Brexit financial services industry: a vision for a workable future

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The prime minister, Theresa May, opened the Conservative Party Conference on Sunday 2 October by revealing that Article 50, the official process by which the UK will leave the European Union (EU), will be triggered before the end of March 2017.

By the following Monday (3 October) morning, sterling had fallen to a three-year low against the euro; by the end of Tuesday it had slumped to a 31-year low against the dollar. But while the pound fell, share prices rose, with the FTSE 100 narrowly missing a record high on Tuesday. So what does this mean for savers and investors?

As many people have commented, the only thing that is certain about Brexit is a period of uncertainty. But the real questions are 'how uncertain?' and 'for how long?'.

Since the referendum result at the end of June, we have been working with our members* to determine how Brexit will impact the UK's savings and investment industry and to seek greater clarity from the government.

OPPORTUNITY FOR POSITIVE CHANGE

We recognise that negotiators will want to keep their cards close to their chests, but this risks turning an opportunity for positive change into a more challenging situation.

In essence, we are urging the government to accelerate the Brexit process by setting out its vision for the UK financial services post-Brexit and to focus on 'equivalence' for UK investment business, rather than full membership of the EU single market.

These recommendations are not dependent on access to the single market, nor on the associated requirements of continuing contributions to the EU and free movement of people.

One of the priorities must be to protect the jobs of over a million people working in the UK financial services sector and to ensure that it prospers post-Brexit.

It is vital that firms can see a clear vision of what the government's negotiating stance will be, so they can commence planning for its implementation.

Failure to do so will only mean continued uncertainty, which is likely to be passed on to hardworking savers and investors. It could also lead to decisions made by UK financial services boards to reduce business risk by moving operations and people to the EU.

We believe that this is an opportunity to create a more streamlined regulatory framework which is focused on the needs of consumers.

WIN-WIN OPPORTUNITY

A simpler tier of rules for everyone will cut away red tape from those firms that only want to service UK consumers. This could be achieved through full recognition that the UK has 'third country equivalent' status for its regulatory framework with the EU.

This is a win-win opportunity as many of the EU directives, for instance AIFMD and MiFID II, already embody the concept and through enabling legislation it can be added to others, such as Ucits.

This would facilitate the continuation of existing business, with minimal impact both for the 113,000 UK jobs dependent upon trade with the EU and for the EU-based companies that have established 8,000 EU passports to trade in the UK today.

By attracting more global, non-EU financial services firms from countries such as Singapore, India and China to the UK through the development of a well-regulated market that is appropriate for the world outside of the EU, we also have an opportunity to ensure UK financial services can prosper outside the EU and generate the economic growth and associated taxes that support UK plc.

We also strongly believe that the government should focus on cutting away most of the paperwork that consumers are expected to wade through to open a savings or investments account.

HOW THE GOVERNMENT CAN PROVIDE GREATER CERTAINTY

We also need to dramatically speed up the process for authorising new market participants.

It's disappointing that many new authorisations for firms take so long, and we can see other financial centres looking to attract business from the UK by offering attractive authorisation and support services.

This is particularly a risk with the new generation of digital businesses that is currently thriving in the UK.

A constant theme that shone through all our research with members was the importance of the quality of the people who work within financial services companies. We must focus on retaining and attracting top talent, both now and in the future, to what is the world's pre-eminent financial sector.

We have urged the government to reassure these professional workers who are here today that they are welcome to stay, and we should also seize the opportunity of Brexit to streamline the visa process, so that going forward we can get the best professionals from Europe and around the world into the UK without delays or hindrance.

Maintaining access to global professional financial services skills is essential to keeping the UK as a world centre for financial services.

UK firms need to feel confident that they have ongoing access to the pool of EU and non-EU talent, supported by a faster visa process, while those professional people already working in UK financial services need to be reassured that we want them to stay.

We have submitted our initial proposals to HM Treasury and are confident that they would enable the UK to thrive outside the EU and to provide greater certainty to savers and investors.

David Dalton-Brown is director general of Tisa.

*Tisa's collaborative research project involved 79 of its member firms spread over 14 group meetings, as well as a number of discussions with other industry bodies.


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