Hard Brexit will have a crushing impact on UK tax take and jobs warns City lobby
05 October 2016 | 8615 views | 0
The UK stands to lose £10 billion in tax revenue and 70,000 financial sector jobs if the Government goes ahead with plans for a full-scale divorce from the European Union.
The figures are compiled in a report prepared by Oliver Wyman on behalf of lobby group TheCityUK. The data will form part of a pushback by the UK's financial services sector on recent Government sabre rattling over the terms of Britain's exit from the EU.
With Government pro-Brexiteers clamouring for a clean break from European influence, Prime Minister Theresa May has warned that there will be no special favours for the UK's financial services sector as the UK negotiates its retreat from Europe.
The Oliver Wyman data, developed with input from TheCityUK's Senior Brexit Steering Committee, industry participants, and the major trade associations, presents two distinct scenarios.
It estimates that a Brexit where the UK is outside the European Economic Area but delivers passporting and equivalence - allowing access to the Single Market on terms similar to those that UK-based firms currently have - will cause only a modest reduction in UK-based activity. In this scenario, revenues are predicted to decline by up to £2BN (2% of total wholesale and international business), 4000 jobs would be at risk, and tax revenues would fall by less than £0.5BN per annum.
Under conditions where the UK moves to a third country arrangement with the EU, without any regulatory equivalence and its relationship with the EU is defined by terms set out under the World Trade Organisation, up to 50% of EU-related activity (£20BN in revenue) and an estimated 35,000 jobs could be at risk, along with £5BN of tax revenues per annum.
When taking into consideration the knock-on impact to the whole financial services ecosyststem - the possibility of shifting of entire business units, or the closure of lines of business due to increased costs it could almost double the effect of Brexit, says former FCA man Sir Hector Sants and vice chairman, Oliver Wyman.
“Our work provides a robust and definitive fact base to facilitate the dialogue between the sector and policy makers," he states. "It highlights that the impact of the UK’s exit from the EU on the UK-based financial services - and the jobs, income and taxes it generates - will vary dramatically with how much access to the EU is retained."
The UK financial services industry currently generates up to £205 billion pounds of revenue annually and employs 1.1 million people, according to the report. The industry pays as much as £67 billion pounds in taxes each year.