PA ANALYSIS: The battle for financial services as Brexit gets real

Added 20th March 2017

Remembered as England’s “largest and bloodiest” encounter, the Battle of Towton of 29 March 1461 gave the country a new monarch and deepened divisions that would not be healed for decades.

PA ANALYSIS: The battle for financial services as Brexit gets real

Over 530 years since the Wars of the Roses ended, for England, and the UK as a whole, the date of 29 March will take on a whole new significance as prime minister Theresa May gives notice of our departure from the European Union with a triggering of Article 50.

While the FTSE 100 is down today (20 March), we would expect that the Brexit process has been too widely telegraphed to cause any great disruption to markets next week.

Still, as the political negotiations begin, so does the hard work for investors who need stay on high alert for potential disruption and volatility - to their investments and their careers.

That the UK is deeply entrenched in the EU economic and regulatory infrastructure means the process of leaving becomes extremely complicated.

For Stephanie Kelly, political economist at Standard Life Investments, there are major points of contention beyond the most obvious in free movement of labour and UK political sovereignty.

"Over 530 years since the Wars of the Roses ended, the date of 29 March will take on a whole new significance"

Another directly impacts wealth and asset managers in that the UK is a large exporter of financial services.

“At present, financial institutions based in the UK can operate easily in the EU without onerous additional regulation, partly through passporting,” Kelly explains.

“Single market exit would raise the risk of non-tariff barriers to these types of activity.

“The government is seeking ‘the freest possible trade’ in financial services with the EU, which could come in the form of mutual recognition or tailored equivalence in regulation. 

“The economic importance of the sector and the role of London as a financial centre make this a key issue.”

A further point of contention for Kelly is the threat that Brexit constitutes to the sustainability of the EU, especially given the signs of growing scepticism in some eurozone countries.

“A fear is that the UK will be the first domino to fall in the unravelling of the European project,” she says.

“EU negotiators are incentivised to maintain the integrity of the EU and deter future rebellions. This must be balanced against a desire to maintain trade and political relations with a strategically important economy.”

 

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Gary Shepherd

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Portfolio Adviser

Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.

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