Brexit: 5,000 financial services firms 'at risk' if UK leaves single market

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More than 5,000 financial services firms are "at risk” if Britain leaves the Single Market after Brexit, a senior Conservative MP has warned.

Andrew Tyrie, the chairman of the Treasury Select Committee, revealed the scale of the threat if the City loses the right to operate across the 27 remaining members of the EU – so-called “passporting”.

A total of 5,476 UK-registered firms hold at least one passport to do business in another member state of the EU or the wider European Economic Area (EEA).

And a further 8,008 firms, registered in other EU or European Economic Area (EEA) member states, hold passports to do business in the UK, information from the Financial Conduct Authority (FCA) revealed.

It is the first time that the number of companies that will be hit by a “hard Brexit” option – favoured by some leading Conservative Eurosceptics – has been set out.

Mr Tyrie said: “These figures give us an initial idea of the effects of losing full access to the Single Market in financial services. The business put at risk could be significant.

“None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops.

“This issue needs to be right at the top of the in-trays of the Chancellor, the Governor of the Bank of England, and the UK’s lead negotiators.”

The task of preserving passporting rights would be “one of the most challenging aspects of the negotiations”, Mr Tyrie warned.

The Treasury committee chairman, a firm Remainer, has been critical of hardline Brexiters, attacked the “false prospectus” offered during the referendum by the Leave campaign.

This week, the head of Germany’s central bank stressed that passporting rights would automatically be lost if the UK was no longer part of the EEA.

That would open the door for Frankfurt to take business away from London, the Bundesbank president, Jens Weidmann, said.

The issue is seen as crucial for Britain’s financial services industry, allowing firms to use London as a hub for serving clients from across the EU, without the need for licences in individual countries.

The FCA revealed the number of firms that will be affected after a request from the Treasury select committee in the summer.

Firms hold multiple passports for different business activities and different member states, bringing the total number of passports held by UK firms to 336,421.

The bulk of passports are issued either under the Market in Financial Instruments Directive (MiFID), covering cross-border investment services, or the Insurance Mediation Directive, the FCA said.

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