Companies within the UK financial services sector could be forced to relocate to mainland Europe if British voters decide to leave the European Union on 23 June, according to an Australian investment group.
In a note to investors, Colonial First State Global Asset Management (CFSGAM) said the UK would have two years following a Brexit to negotiate new trade and export regulations with the EU.
Based on the British government’s own estimates, CFSGAM said it would take “up to a decade” to reach adequate trade deals for each sector.
After the two-year negotiation period, the most likely outcome for the UK would be a “disorderly exit” with no replacement agreements to substitute current EU arrangements, the note said.
CFSGAM said export to the EU comprises more than 40 per cent of the financial services industry’s market, and leaving the EU would likely result in UK service providers being locked out of the EU single market, severely impacting the financial services industries.
Bank of England governor Mark Carney has acknowledged that some financial sector activity would relocate to the EU “without question” following a Brexit.
The UK Treasury reports that leaving the European Union would result in up to a £36 billion reduction in tax receipts, which would “significantly outweigh any potential gain”.
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