A so called “hard Brexit” deal, which would see the UK drifting away from cooperation with the rest of the EU, could cost the UK billions in lost taxes, treasury officials have privately warned.
According to a report by The Times, senior city figures are preparing an analysis that is likely to show the Exchequer losing at least £10bn a year if Britain’s new deal with the EU prevents banks and financial firms to trade in Europe.
The tax contribution of the UK banking sector climbed to £31.3bn in 2014, according to the British Bankers Association (BBA).
The BBA, found that foreign headquartered banks paid just over half of the total tax contribution at £16bn, while UK-headquartered banks contributed by £15.3bn.
Chancellor Philip Hammond is to present his first Budget statement in November, setting out how the Government will use tax and spending plans to shore up the UK economy after the vote to leave the EU. The statement will be accompanied by the latest forecasts for the economy and public finances from the Office for Budget Responsibility (OBR), the Government’s independent fiscal watchdog.
UK banks fear they may lose passporting, or the ability to do business with the whole of the EU.
Foreign investors and companies have been cancelling plans to move in, while those based in the UK are looking to move out
Last week, Andrew Tyrie, chair of the Treasury Select Committee, revealed the scale of the threat to the UK’s financial services sectors, saying nearly 5,500 British firms hold at least one passport to do business in another member state of the EU or the wider European Economic Area (EEA).
It is the first time that the number of companies that will be hit by a “hard Brexit” option has been set out.
What experts have said about Brexit
What experts have said about Brexit
1/11 Chancellor of the Exchequer Philip Hammond
The Chancellor claims London can still be a world financial hub despite Brexit “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs” “This has not changed as a result of the EU referendum and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”
2/11 Yanis Varoufakis
Greece's former finance minister compared the UK relations with the EU bloc with a well-known song by the Eagles: “You can check out any time you like, as the Hotel California song says, but you can't really leave. The proof is Theresa May has not even dared to trigger Article 50. It's like Harrison Ford going into Indiana Jones' castle and the path behind him fragmenting. You can get in, but getting out is not at all clear”
3/11 Michael O’Leary
Ryanair boss says UK will be ‘screwed’ by EU in Brexit trade deals: “I have no faith in the politicians in London going on about how ‘the world will want to trade with us’. The world will want to screw you – that's what happens in trade talks,” he said. “They have no interest in giving the UK a deal on trade”
4/11 Tim Martin
JD Wetherspoon's chairman has said claims that the UK would see serious economic consequences from a Brexit vote were "lurid" and wrong: “We were told it would be Armageddon from the OECD, from the IMF, David Cameron, the chancellor and President Obama who were predicting locusts in the fields and tidal waves in the North Sea"
5/11 Mark Carney
Governor of Bank of England is 'serene' about Bank of England's Brexit stance: “I am absolutely serene about the … judgments made both by the MPC and the FPC”
6/11 Christine Lagarde
IMF chief urges quick Brexit to reduce economic uncertainty: “We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making”
7/11 Inga Beale
Lloyd’s chief executive says Brexit is a major issue: "Clearly the UK's referendum on its EU membership is a major issue for us to deal with and we are now focusing our attention on having in place the plans that will ensure Lloyd's continues trading across Europe”
8/11 Colm Kelleher
President of US bank Morgan Stanley says City of London ‘will suffer’ as result of the EU referendum: “I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much”
9/11 Richard Branson
Virgin founder believes we've lost a THIRD of our value because of Brexit and cancelled a deal worth 3,000 jobs: We're not any worse than anybody else, but I suspect we've lost a third of our value which is dreadful for people in the workplace.' He continued: "We were about to do a very big deal, we cancelled that deal, that would have involved 3,000 jobs, and that’s happening all over the country"
10/11 Barack Obama
US President believes Britain was wrong to vote to leave the EU: "It is absolutely true that I believed pre-Brexit vote and continue to believe post-Brexit vote that the world benefited enormously from the United Kingdom's participation in the EU. We are fully supportive of a process that is as little disruptive as possible so that people around the world can continue to benefit from economic growth"
11/11 Kristin Forbes
American economist and an external member of the Monetary Policy Committee of the Bank of England argues that the economy had been “less stormy than many expected” following the shock referendum result: “For now…the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction”
Some businesses are already working on contingency plans to ensure they can still trade across Europe once Article 50 is triggered.
On Monday, a survey of a 100 chief executive by KPMG, found that over half of those surveyed said they believed that the UK’s ability to do effective business will be hindered after leaving the EU. More than 75 per cent said they were considering moving some operations outside of Britain, the study found.
Conservative MPs who backed Remain in the referendum will warn Theresa May not to sleepwalk out of the EU single market by bowing to pressure from Eurosceptic ministers at the Conservatives’ conference in Birmingham next week.