Disruptions to the level of market access in financial services as a result of Brexit will leave “no 'winners’”, according to a report from professional services firm PwC.
PwC’s report, which focuses on the impact of the loss of mutual market access in financial services across the EU27 and the UK, projected that disruptions would be “economically costly”, with the UK most negatively impacted by the loss of mutual market access.
For remaining EU members, the economic impact “incorporates both gains and losses”.
The report showed: “While Frankfurt has emerged as the likely recipient of the largest amount of relocated activity (particularly from US and Japanese banks), a number of other cities have also been selected, including Paris, Berlin, Amsterdam, Brussels and Madrid.”
“However, these gains from relocated activity are out weighted by the impact of fragmentation and loss of efficiency, which increases the cost of finance throughout the whole economy. For the EU27, the annual gross value added (GVA) impact is -0.3 percent (or €33 billion in 2016 values) by 2030.”
It added: “Financial services focused states have possibly the most to gain by gaining a greater share of relocated financial service activities from the UK, but they are also more negatively impacted from the fragmentation of EU financial markets, so for them the overall impact is still negative.”
“In overall terms, for the existing EU28, our central estimate is that there would be a negative economic impact of -0.45 percent of total GVA (or €60.2 billion in 2016 values).”
PwC said that this study considers “the scenario in which the British financial services sector can no longer access the European market except as an average third country, and vice versa.”
The report identified seven distinct channels through which the financial services sector and its linkages to other industry sectors might be affected under such a scenario, then assessed how these effects would have wider economic impacts on the whole EU economy.
It is as yet unclear whether the UK will remain a part of the single market.
While UK prime minister Theresa May did not rule out single market access, she made it clear in her speech at Mansion House on 2 March that remaining in the single market “would mean having to implement new EU legislation automatically and in its entirety” and “would mean a significant reduction in our access to each other’s markets compared to that which we currently enjoy”.
