Hours after the EU Referundum results were revealed, UK Head of Banking and Capital Markets at PwC Simon Hunt comments on the impact that Brexit will have on the banking sector in the country.
The UK is one of the world’s leading financial centres. The banking sector plays a major part in generating exports of £23bn to the EU, which helps to drive an overall trade surplus in financial services of £20bn. Retaining this position is the challenge that banks and all stakeholders may now have to consider.
One of the most significant benefits of EU membership to the banking sector is the ability to access the Single Market via the passporting regime and the loss of passporting benefits would have an impact on the ability of banks authorised in the UK to offer products and services for EU clients.
This impact will not be limited to the UK headquartered banks but will also impact non-EU headquartered banks who have used the UK as a base for their European operations.
Overseas banks currently using the UK as a base for accessing the EU market and employing an estimated 115000 staff are likely to be looking closely at their operations in the UK in the context of the leave vote.
The result of the vote does not represent the end of the debate that has impacted markets in recent months. Months, and possibly years, of negotiation will now follow before banking organisations will have clarity on what access UK-based FS organisations will have to EU countries or the rules they must comply with to secure this access.
We are already starting to see the short-term impact on the market as efforts are made to reinforce confidence in the UK banking sector. However, history has taught us that UK business is adaptable and the banking sector is one of our strongest industries and will continue to make a major contribution to the UK economy. Collectively, the financial services sector accounts for 8% of total UK economic activity and directly employs 1.1 million people – around 3.6% of the total UK workforce, generating income, investment and exports.
This result could be taken as a major opportunity for banks to work with regulators, investors and clients in order to shape a new rulebook fit for the new climate.