The U.K.’s biggest insurers, banks and asset managers have placed flexible immigration rules among their top priorities for a Brexit deal, as the industry seeks to mitigate the potential impact of leaving the European Union, according to a lobby group.
Changes to Britain’s visa and immigration system to help financial firms hire foreign nationals, a deal on market access and other measures could help generate 43 billion pounds ($55.5 billion) of economic gains by 2025, according to a report by TheCityUK published on Thursday. While the plan helps regain some lost ground from Brexit, it still won’t bring as many benefits as remaining in the EU, it added.
“We need to make the argument to government of the need to continue to allow people from overseas to come and work in the sector,” former U.K. Treasury minister Mark Hoban, who led the publication of the report for TheCityUK, said in an interview. “It’s particularly important given the global nature of the sector that we have a global workforce.”
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Prime Minister Theresa May is under pressure to focus on the needs of the economy rather than reclaiming sovereignty over immigration and law-making as Britain negotiates its divorce from the EU. Business leaders have complained about potentially losing access to international talent as her government seeks to curb the inflow of migrants to the tens of thousands annually.
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“In the absence of a deliberate strategy to counter the effects of Brexit and other challenges, the industry is expected to stagnate,” Hoban’s team wrote in the report, produced with accounting firm PricewaterhouseCoopers LLP. The study’s 35-point package of recommendations can help the finance industry “return to growth – albeit moderate – after a period of considerable adjustment,” it said.
May’s government should ensure continued movement for European citizens coming to Britain for work, including for some individuals without immediate employment prospects, according to the report.
Net migration to the U.K. fell by a quarter to 248,000 in 2016, driven by an increase in EU citizens leaving the country, while British rules around immigration have tightened, the report said. The cost to employers of sponsoring a five-year general visa has increased 250 percent between 2016 and 2017 and now totals 7,000 pounds, while the minimum salary threshold for workers has risen 44 percent since July 2015 to 30,000 pounds a year, according to the report.
The recommendations could help the finance industry contribute an additional 16 billion pounds to the U.K. economy by 2025, with about two thirds of the growth coming from outside London. The alternative scenario would deliver a loss in the U.K.’s international competitiveness as a financial center and slower growth, the report said.
Mass Exodus?
Some global banks with European headquarters in London are already poised to move parts of their operations elsewhere in the EU. There is a “threat of a tipping point in the ecosystem being reached at some stage in the future,” according to the report.
Finance firms could relocate en masse when the cost of having to hold additional capital in multiple locations becomes uneconomical, it added. The report argues for the U.K. to secure “mutual market access” for U.K. and EU finance companies following Brexit, while securing a transitional arrangement to avoid a so-called cliff edge at the end of the nation’s two-year negotiation period.
Copyright Bloomberg 2017
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