Goldman Sachs has warned that there can be job cuts if there is no deal when the United Kingdom goes out of the European Union. This has caused UK politicians to start an inquiry to ascertain the best way out for the financial sector. Brexit is to be set ion on March 29 unless there is any dramatic development.
The aim of the inquiry is to determine whether it is fit for the UK to track European Union rules or break free of them and which would be the best suited for the UK financial sector.
The financial sector is the largest tax contributor in the UK generating more than £70 billion each year in tax revenues for the British government and the EU is the largest customer for the sector.
“London is the world’s premier financial centre, and many of us want to keep it that way,” Treasury Select Committee chair Nicky Morgan said in a statement.
The UK has not yet managed to arrive at any deal with the EU for a framework when it leaves the block in a little over two months time. This situation has forced all of the British banks, insurers, asset managers and trading platforms that have European customers to set up new hubs in the main continent.
According to a comment by the Goldman Sachs chief executive David Solomon made in the media to at Davos, of there is a no deal Brexit, the investments by the bank would be less in Britain.
“But I would say that, over time, if this is resolved in a difficult way or a hard way, it’ll have an impact on where we invest and where we put people,” Solomon said.
The option of a no deal Brexit would probably be taken off the table after a vote in the UK parliament next week. However analysts expect that there would probably be no clear sign of what a divorce deal would be like.
Proponents of Brexit argue that it is an opportunity for the financial sector of the UK to rehash the rules and retain the reputation of London as a competitive force in the global financial industry.
On the other hand, British financial regulators want to regulations to remain close to the EU regulations and are dead against creating a “bonfire” of regulations and have issued warnings about the challenges of “light touch” rules which can potential cause a financial crisis.
The committee said today it will look at what Britain’s priorities should be when it negotiates future trading relations with the EU and other countries.
According to the EU, the financial sector of the UK would potential face the same challenges and an unpredictable system in relation to market access as are faced by other non-EU countries such as the US and Japan.
The financial sector of the UK does not want to have any significant change in the current rules, said Miles Celic, chief executive of The City UK, which promotes Britain’s financial services abroad.
“The UK’s reputation for quality regulation and high standards is a key competitive advantage,” Celic said.
The UK should avoid fragmenting markets, said Stephen Jones, head of UK Finance, a banking industry body.
“We also need to ensure the UK’s tax policy is globally competitive,” Jones said.
(Adapted from RTE.ie)