November 3, 2015
The overwhelming victory of the Conservatives in the 2015 General Election has brought the potential exit of the UK from the EU – or, “Brexit” – to the political forefront.
By the end of 2017, David Cameron has promised a referendum on whether to leave the EU or not. A new paper by FTI Consulting’s Financial Services Practice in Brussels, advises and assists clients in navigating the often complex European Union and its Single Market, assesses the consequences a Brexit would have on the City of London, the lifeblood of the British economy.
With a detailed look at the impact on pivotal parts of the financial sector, including markets infrastructure, asset management and payments systems to make the assessment, the analysis places the discussion in the broader macroeconomic perspective.
The study suggests that the financial sector appears to be particularly vulnerable to a Brexit – that there are still many open questions regarding any advantages the UK would gain by leaving the EU while wanting to maintain access to the internal market.
Importantly, the effect of Brexit on UK financial services will depend largely on the kind of arrangements the UK will be able to negotiate to replace EU membership. For example, one option would be to become a member of the EEA, in order to retain access to the Single Market. An alternative could be a bilateral agreement with the EU, in the same vein as Switzerland. (However, the negotiation dynamics would be different – since it would center on a country seeking to leave the bloc, not join it.)
As the paper notes, “Potential negative economic implications of a Brexit outlined in this briefing could be decreased by alternative arrangements. However, if these are not negotiated successfully, a more adverse outcome is not unthinkable.”
Read the full briefing paper.