By Huw Jones
LONDON (Reuters) – The growing tally of UK-based banks, insurers and asset managers opening hubs in the European Union means that a post-Brexit trade deal in financial services may be of limited importance to either side, the New Financial think tank said on Wednesday.
An EU summit on Thursday aims to agree a divorce settlement ahead of Britain’s scheduled Oct. 31 departure from the bloc.
The EU has said future market access for UK financial firms will be based on “equivalence”, whereby Brussels grants access if it deems a foreign country’s home regulation is as robust as the EU’s own regulation.
Britain’s finance ministry has been sounding out its financial sector ahead of the government’s negotiations with the EU on future trade after Brexit.
Shifts by UK financial firms to the EU could make it easier for Britain when it comes to deciding which sectors to favour in the inevitable trade offs with the EU across industries.
“The scale of relocations significantly reduces the potential benefit of the granting of equivalence or of any potential future deal in financial services between the UK and EU,” New Financial said.
The report points to share trading and clearing as among the few areas where obtaining equivalence would be of benefit.
With access to the EU obtained via new units in the bloc, Britain could focus more on developing its business with the rest of the world, New Financial said.
This would also reduce British worries about having to stay closely aligned with EU rules or becoming a “rule taker” to retain equivalence, it added.
Over 330 firms have relocated part of their business, moved some staff or set up new entities in the EU, up by more than 60 from New Financial’s initial tally in March.
Dublin is ahead of the pack in attracting business from Britain, with 115 firms choosing the Irish capital, well ahead of Luxembourg with 71 firms, Paris with 69, Frankfurt 45, and Amsterdam 40.
Dublin has attracted nearly 40% of all asset management firms from London, while banks have mainly chosen Frankfurt, home to their future regulator, the European Central Bank.
Amsterdam has attracted two-thirds of exchanges and other trading platforms looking for a post-Brexit base. New Financial has not updated its March estimate of 5,000 job moves and about 800 billion pounds ($1 trillion) in assets shifting base.
“Over time, we expect the headline numbers of firms, staff, and business to increase significantly,” the think tank said.
(Reporting by Huw Jones; Editing by Mark Potter)