Cost of 'Hard Brexit' increases as UK financial services post record £68bn surplus

Country more reliant on the City than ever as nation edges towards break from single market with no 'special treatment' for banks

(Reuters)

The full extent of the country’s reliance on financial services and the damage that could be caused to the economy by a ‘Hard Brexit’ has been highlighted by new data.

Britain sold £63.4 billion more in financial services to overseas businesses than it bought from them, a report by lobby group, the CityUK, showed. The amount represents a new record and is in stark contrast to many other sectors where the country is running large deficits.

Strong sales of financial services helped to constrain Britain’s ballooning trade deficit, which reached £38.7 billion last year, the report shows.

The City expects to suffer more than many other sectors as a result of Brexit, with so much of its income reliant on trade with the EU.

The industry is pleading with Theresa May’s government for a special deal to retain access to the single market but senior government figures have said that banks will be treated the same as other industries.

The UK’s surplus in financial services is more than that of the US, Switzerland, Luxembourg and Singapore combined, highlighting the extent of the country’s dependence in the industry.

London accounts for more international bank lending than any other financial centre and is the dominant centre for trillions of dollars in foreign exchange transactions - 37 per cent of global forex is conducted in the UK.

Brexit is a unique opportunity to attract investment and expand into new markets.

Liam Fox - International Trade Secretary

City UK Chief executive Miles Celic, a former PR man at HSBC and Prudential, claimed the record surplus showed the industry had made its “most significant contribution to UK exports” since the Big Bang shook up the nation’s banks in 1986.

He said it was crucial the Government secured a “mutually beneficial” Brexit deal for Britain and the EU so industry could prosper.

“It is absolutely essential that the Government remains focused on implementing bold policies that protect the attractiveness and competitiveness of the UK as a place to do business through Brexit and beyond.”

“[Britain's financial services sector] is a national asset and its continued strength is fundamentally linked to a strong and thriving economy,” he said.

“It is also a European asset given its role as Europe's financial centre, which is why ensuring a deal which is mutually beneficial for the EU and the UK and ensuring stability and certainty to the extent possible and protecting the interests of the industry's customer and clients is in everyone's interests.”

A previous report by TheCityUK suggested that a “hard Brexit” could cost the City of London 75,000 jobs.

Some banks, including Carnegie Investment Bank, have withdrawn investment from the UK due to uncertainty around Brexit. Others such as Morgan Stanley and JP Morgan are drawing up contingency plans to move some staff, and British-based Barclays has cut back on office space.

Labour MP Stephen Kinnock, of the Open Britain campaign, urged the government to work hard for the City’s interests in any Brexit negotiations. “To protect jobs, public services and economic stability, we need a Brexit deal that keeps the single financial passport, and retains unfettered access to the EU single market.”

However, EU leaders have all but ruled out the kind of unfettered access Kinnock referred to.

Liam Fox, International Trade Secretary, told the City to look beyond Europe to “build new global relationships” and seize a, “unique opportunity to attract investment and expand into new markets.”