Whilst there is still a considerable amount of uncertainty surrounding Brexit, what we do know for sure is that it will almost definitely have an impact on the financial industry. We certainly can’t blame you for wanting to avoid the reality of Brexit, but it is paramount that you are aware of the potential impact of Brexit on financial technology companies and traditional institutions alike, in order to prepare for what’s to come. You can find more about below.
One of the most significant – yet important – issues at stake as a result of Brexit is passporting. As you are probably already aware, passporting is the process that all British-based financial institutions, including banks and asset management firms, must follow in order to sell their products and services to the remainder of the EU without the need to attain a license or receive regulatory approval. Essentially, this means that because over 5,000 firms in the UK rely on passporting in order to conduct business with the UK, it will become increasingly difficult for UK firms to continue selling into the EU. Regardless, Britain almost certainly will no longer be able to benefit in the same way!
When it comes to understanding the impact of Brexit on the financial industry, one of the crucial issues related to Brexit is regulatory uncertainty. Whilst regulation has previously been one of Britain’s most noticeable strengths, especially when London became Europe’s financial capital, Brexit significantly complicates things.
To begin with, in light of Brexit, Britain will be required to re-negotiate over 40 years’ worth of EU regulations and trade deals alike. This will take a considerable amount of time to complete, of which many financial services cannot afford to wait for. Timing issues aside, it is not currently clear as to whether the new UK financial regulation will benefit the sector, and thus the true impact of Brexit on the financial industry is still marginally a complete mystery.
Poor Short-Term Prospects
How else will Brexit impact the financial industry? Well, with passporting and regulation in mind, it is already easy to see exactly how Brexit will impact the financial industry and UK economy in the near future. Ultimately, although we can’t say for certain, London isn’t likely to collapse as a financial centre as a whole. However, despite this, it is predicted that some, if not most, of London’s financial firms will begin to move elsewhere as a result of Brexit if they haven’t already fled the capital in light of the rumours that have been circulating since the referendum.
It’s no secret that Brexit could possibly cause lasting damaged to the financial sector, as yet another impact of Brexit on the financial industry is that it might trigger a threatening process of brain drain that would ultimately subvert one of the major reasons why London is Europe’s financial capital. Just like Silicon Valley, London in particular significantly benefits from a mass of industry-specific talent living and working within vicinity. In the case of Brexit, things might not continue to be this way. Visa uncertainly may affect the availability of foreign employees, for example. Equally, the prospect of job-loss could cause top talent to move elsewhere while they have the chance! Ultimately, this means that Britain will lose invaluable talent – and fast.
With all of this in mind, it is essential that you understand the potential impact of Brexit on the financial industry in order to prepare for the coming whirlwind. How do you plan to prepare for the impact of Brexit?