Philip Brooks: Opportunities lie in the uncertainties of Brexit
Public affairs professional can provide guidance to the financial services sector.
Never has a quote by Donald Rumsfeld, which at the time was somewhat mocked, been so apt.
"There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know," said the 13th Secretary of Defense.
"But there are also unknown unknowns – the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”
We know that the UK is going to leave the EU. We still don’t know what sort of agreement, if any, will be reached. Especially in relation to financial services. One thing is for certain – there will be wider, far reaching implications for business and trade that simply no one will have had the foresight to consider.
We also know that this presents public affairs professionals with both a challenge and an opportunity. The challenge lies in quickly analysing and understanding developments in negotiating a path through this unchartered territory. The opportunity lies in the likely demand from the financial services sector for assured guidance in navigating the legislative and regulatory obstacles along that route.
A strong financial services sector is critical to both the UK and Europe. The sector contributes around 7% towards UK GDP, directly employing 1.1 million people, with two thirds of those employed based outside of London generating 12% of PAYE income tax and national insurance contributions. If we add on related professional services (i.e. management consultants, legal services, accounting services etc.) the total employment figure increases to 2.2 million.
Therefore maintaining a healthy and thriving sector is clearly critical to the UK economy, but the impact beyond our shores should not be underestimated either.
Since the referendum, a number of European states have started jostling for a stronger position with the aim of attracting providers to their shores. However, the eco-system which exists within London (bankers, brokers, lawyers all the way to FinTech) makes it very difficult for others to replicate.
We must remember, the strength of London means its success, albeit critical to the UK economy, is also very important to the EU. According to a briefing by the European parliament, although just over half of the City’s turnover was domestic, around a quarter (24%) of EU financial services pass through London.
Clearly at the heat of the challenge is market access. The clock is definitely ticking, it has been seven months since Article 50 was triggered and we still are no closer to understanding what sort of business environment will be in operation come March 2019. It’s this uncertainty that many who support the industry find deeply concerning.
Philip Brooks is financial services research director at ORC International. Brooks and Andrew Fleming, a director at MHP Communications, have written the financial services chapter of Helen Tse’s book, Doing Business After Brexit: A Practical Guide to the Legal Changes.