Open Europe says without access to single market, banks will start moving operations out of the UK.
To avoid big banks and insurers fleeing the City of London, the UK should seek a tailored deal with the EU rather than fall back on existing “equivalence” rules, the think-tank Open Europe said.
Relying on the patchwork of market access arrangements available to all “third countries” deemed to have a regulatory system equivalent to the EU is “at best a partial solution for certain parts of the industry”, it warned in a report.
Open Europe, which took a neutral stance on the referendum, said Britain could risk losing its status as a hub for financial services unless passporting rights are made the top priority in negotiations with the EU. The warning came as the Financial Times reported that the government is considering proposals that would see billions of pounds paid into the EU budget in exchange for giving the financial sector continued access to the single market.
Some sectors, such as asset management and insurance, could cope relatively easily with the loss of “passporting” rights that come with EU membership and provide access to the single market, according to Open Europe.