Brexit: Financial services contributes record £71.4bn in taxes underlining importance of single market access

Sector says it needs to maintain its 'passporting' rights to trade within the EU
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The Independent Online

The crucial importance of maintaining the UK’s passport to sell financial services across the EU was underlined today, as new figures showed the country's dependence on the sector increased in 2016.

Finance, including banking, insurance, fund management and other services, accounted for a record £71.4 billion of the UK’s total tax receipts, accounting firm PwC and the City of London Corporation revealed.

That’s a 7.4 per cent rise for the year to April, compared to the previous twelve months, though it does not take into account the impact of the Brexit vote. Some areas such as broking and bond and currency trading have seen a short term boost from the volatility caused by the shock result as well as the election of Donald Trump as US President.  

The Government now collects 11.5 per cent of tax from financial services firms, though this is still down on the 13.9 per cent share reached in 2007 on the eve of financial meltdown.

The increase is largely down to a rise in the bank levy as well as the corporation tax surcharge for the largest banks, which are designed to limit risk-taking and discourage banks from becoming too big to fail.

“In light of the UK’s decision to leave the EU, these new findings not only demonstrate the significant contribution made to government revenues, but are also key in helping us to understand the potential impact of Brexit on different sub-sectors within financial services,” said Mark Boleat, policy chairman at the City of London Corporation.

The news comes as Chancellor Philip Hammond and Brexit minister David Davis met with leading financial figures to discuss how to make the post-Brexit transition as smooth and orderly as possible. Central to these discussions was so-called “regulatory equivalence” between the Uk and the EU. 

Under this scenario, Britain’s financial firms could still sell their services across the union using a passport, as long as the rules here remain similar enough to the EU’s.

London’s financial firms have become increasingly jittery as members of Theresa May’s government have made noises about pursuing a “hard Brexit”. Such an option is seen as particularly damaging for the sector which is highly reliant on international business as well as recruiting skilled employees from overseas. EU officials too have stated that access to the single market cannot be maintained without free movement of people