Hard Brexit could cost City of London 35,000 jobs and £20bn of revenue

Britain’s financial hub could lose around 35,000 jobs if the country leaves the EU single market, according to research published on Wednesday.

The report, commissioned by TheCityUK and published by management consultancy Oliver Wyman, calculated that up to 50% of EU-related activity, which generates £20bn in revenue, could be at risk if Britain moves to a position post-Brexit where it does not have any regulatory equivalence and its relationship with the trading block is through World Trade Organistion rules.

There has been debate about whether Britain should push for a ‘soft Brexit’, where the country would maintain access to the single market but adhere to the principles of the free movement of people, or a ‘hard Brexit’ that would involve leaving the single market, curbing free movement and trading under WTO rules.

Prime Minister Theresa May said “we are not leaving the EU only to give up control of immigration again” on Sunday, which was taken as a strong indication of a 'hard Brexit' and was followed by the pound plummeting to a record 31-year-low against the dollar.

The financial sector is particularly concerned by passporting rights which allow financial institutions to conduct business across the continent easier through a single license rather than many.

London’s status as a financial hub has been put in doubt since the country voted to leave the EU with speculation that business and financial institutions would move to other cities such as Paris or Frankfurt within the EU.

About 35,000 jobs and £5bn of tax revenue per year could also be in jeopardy, the report calculated, while noting that the £205bn financial sector pays about £67bn in tax per year and employs more than 1m people.

The report found that the possibility of moving business to the EU from London, or the closure of lines of business due to increased coots, could almost double the effect of Brexit.

However, CityUK suggested that if Britain was outside the European Economic Area, but maintained passporting rights through the single market on terms similar to those that British businesses already have, it would cause only a modest reduction in UK-based activity.

It predicted that revenue would fall by £2bn, or 2% of total whole and international business, 4,000 jobs would be at risk and revenue from tax would fall by less than £500m.

Sir Hector Sants, vice chairman of Oliver Wyman and former head of the Financial Conduct Authority, said the report highlights that the impact of the UK’s exit from the EU on the UK-based financial services and the jobs, income and taxes it generates will vary with how much access to the EU is retained.

He said: “It is in everyone’s best interests for there to be a positive outcome to the negotiations that is mutually beneficial to the UK and the EU, causes minimum disruption to the industry and benefits customers who have come to rely on the UK as a uniquely skilled and connected ecosystem for financial services.”