Brexit’s Winners and Losers. An Empirical Analysis of Economic Effects of Deglobalisation on the Financial Services Industry

Table of Contents

1. Introduction

2. Development of Brexit and UK-EU Relationship Negotiations

3. Status quo ante Brexit

3.1. The UK's Financial Services Industry's Reliance on the EU

3.2. The EU's Legislative Framework

3.2.1. Financial Services Passport

3.2.2. Free Movement of Labour

3.3. The City and the Ecosystem

3.4. The UK's Financial Services in the Eyes of the EU

4. Status quo post Brexit

4.1. Provision of Services into the EU

4.1.1. Classical Access to the European single market

4.1.2. Centralised Access under Equivalence:

4.1.2.1. Process of Equivalence Determination

4.1.2.2. Scope of Equivalence

4.1.2.3. Diverging from EU Rules

4.1.2.4. Politicisation

4.2. Human Capital

4.3. Other Third Countries

5. Outlook

6. Conclusion

Research Objectives and Core Topics

This academic paper examines the economic consequences of deglobalisation on the United Kingdom's financial services industry in the context of Brexit, specifically focusing on a "no deal" scenario. The central research objective is to analyze how the loss of passporting rights and the shift to third-country status impact the competitive landscape and operational viability of UK-based financial firms.

• Analysis of the UK's financial services industry dependence on the EU market.
• Evaluation of the EU's legislative framework, including passporting and equivalence mechanisms.
• Assessment of the challenges regarding human capital and recruitment post-Brexit.
• Investigation of strategic firm-level responses, such as relocation or restructuring.

Excerpt from the Book

Summary of Chapters

1. Introduction: Outlines the rise of global integration and the subsequent move toward deglobalisation, framing the research on the impact of a no-deal Brexit on the UK financial sector.

2. Development of Brexit and UK-EU Relationship Negotiations: Traces the political history from the 1973 accession to the withdrawal process initiated by Article 50.

3. Status quo ante Brexit: Analyzes the pre-Brexit state of the financial sector, emphasizing its high integration with the EU, the role of passporting, and the significance of the City of London.

4. Status quo post Brexit: Investigates the legal and operational challenges for firms, specifically regarding service provision through equivalence, loss of passporting, and the movement of human capital.

5. Outlook: Provides a forward-looking perspective on the operational challenges and strategic shifts firms must navigate in an environment of increased regulatory uncertainty.

6. Conclusion: Summarizes findings, noting that no substitute for full EU market access exists and that deglobalisation will significantly reshape the UK financial ecosystem.

Keywords

Brexit, Financial Services, Deglobalisation, No Deal, Passporting, Equivalence, Third-country status, Market Infrastructure, Banking, Asset Management, Human Capital, Regulatory Framework, European Union, United Kingdom, Economic Output.

Frequently Asked Questions

What is the core focus of this research paper?

The paper examines the economic and regulatory impact of Brexit on the UK financial services industry, specifically under the assumption of a "no-deal" scenario.

What are the primary thematic areas explored?

Key themes include the reliance of UK firms on EU market access, the transition from passporting to third-country status, the politicisation of equivalence, and the potential relocation of financial activities.

What is the main research question?

The paper seeks to determine the impact of a no-deal Brexit on the UK financial services industry, particularly regarding market access and regulatory alignment.

Which scientific methods are utilized?

The author performs an empirical and descriptive analysis of existing trade data, legal frameworks (EU directives), and industry reports to forecast future economic consequences.

What does the main body of the work cover?

It covers the historical development of Brexit, an analysis of the industry's reliance on the EU, the legal mechanisms of equivalence versus passporting, and the risks to the City of London as a financial hub.

Which keywords best describe this study?

Core keywords include Brexit, financial services, deglobalisation, passporting, equivalence, and the City of London.

How does the "equivalence" mechanism differ from passporting for UK firms?

Equivalence is described as a non-automatic, unilateral process prone to politicisation, offering a narrower and less stable scope of market access compared to the broad, reliable passporting rights enjoyed pre-Brexit.

Why does the author argue that relocation is a likely consequence for many firms?

The author suggests that since equivalence does not provide the same depth of market access as the single market, firms requiring continuous access to EU clients will find physical relocation to an EU member state the most reliable strategy.