Almost 5,500 UK financial firms' EU passports at risk from 'hard Brexit'

Showing the potential impact of losing access to the European single market as part of a 'hard Brexit', the City regulator revealed on Tuesday that close to 5,500 UK based firms hold at least one 'passport' to do business in the European Union.

Data from the Financial Conduct Authority released by the Treasury Select Committee showed that 5,476 UK-registered firms hold at least one passport to do business in another EU or EEA member state.

“These figures give us an initial idea of the effects of losing full access to the Single Market in financial services," said Treasury Committee chairman Andrew Tyrie.

The passports are a mechanism through which firms may exercise their right to provide services and operate in another EU country, which is then recognised by all other Member States as an authorisation to do business in their territory as well.

On Monday, Deutsche Bundesbank president Jens Weidmann warned that a hard Brexit from the EU will see British financial institutions automatically lose 'passporting' rights if the country left the single market.

With the total number of passports rising to 336,421 through many businesses holding a number of passports for different business activities and different member states and 8,008 European firms using passports to provide services in the UK, the level of UK business that is being put at risk is clearly significant.

Said Tyrie: “None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops. Efforts to secure an appropriate arrangement for UK-based firms will be one of the most challenging aspects of the negotiations about the UK’s future relationship with the EU."

“No doubt the hard grind of establishing what best protects UK interests is already underway. This issue needs to be right at the top of the in-trays of the Chancellor, the Governor of the Bank of England, and the UK’s lead negotiators.”