LONDON – All alternatives to Britain’s membership of the European Union are second best and risk damaging the competitiveness of the City of London’s finance industry, although Brexit would not be ruinous for the economy, TheCityUK lobby said on Wednesday.
In a guide to the consequences of Brexit, TheCityUK said a bespoke financial services agreement between Britain and the EU was feasible, but its content would be uncertain.
Negotiations would take a long time and the bloc could end up treating Britain as a less-regulated “off-shore” centre, TheCityUK, which lobbies for Britain’s financial services sector, said.
“We haven’t seen anything that gives the UK the same level of influence as membership.” -Chris Cummings. TheCityUK Chief Executive.
Britain goes to the polls on June 23 to vote on whether to stay in the EU or leave.
If Britain backed Brexit, a two-year negotiation period on exit terms could mitigate some of the initial fallout.
“I don’t think we would see a huge movement of jobs immediately, but what would worry me greatly is that foreign direct investment doesn’t arrive,” Cummings said.
“I don’t think all businesses that would leave the UK would end up in Paris or Frankfurt. I think quite a share would go to New York and Asia, with Europe as a whole losing out,” he said.
TheCityUK said if Britain left, it could not be assumed that EU regulators would be able to live with big EU financial services businesses maintaining their current level of assets in London if markets there were subject to different rules.
TheCityUK also represents related services like accounting and law firms, which, together with the banks, employ some 2.2 million people.
The finance industry accounts for nearly 12 percent of the British economy and pays 66 billion pounds ($93.75 billion) a year in tax, making it the biggest contributor to government coffers of any business sector.
TheCityUK, which has already stated that Britain is better off staying in the EU, listed the drawbacks of any potential alternatives to membership, such as still having to contribute money to the EU for access to the single market while having no say over its financial rules.
Banks in London have also backed staying in and last week the City of London, the municipal authority for the financial district, also formally supported staying.
U.S. banks Morgan Stanley Citi have said there could be a backlash against Britain as a financial centre if it left the EU. Goldman Sachs and JPMorgan have made donations to the campaign to keep Britain in, sources have said.
London mayor Boris Johnson, who is campaigning to pull Britain out of the EU, has said leaving would be a “golden opportunity” and has dismissed “threats” from banks to relocate from London.
Bank of England Governor Mark Carney said less favourable exit terms under a Brexit would see some banking operations move to Ireland or continental Europe.