The immediate impact on financial services firms of the vote by the UK to quit the European Union has been “not as stark as feared” says a new report today.
However, the upbeat survey from accountancy and business advisory giant EY comes as the latest survey of Scottish small and medium sized businesses (SMEs) says that post-Brexit they have concerns “over costs, plans and recruitment”.
EY’s ‘Brexit Tracker’, which looks at the public statements of the UK’s biggest financial services companies since the referendum, says investment banks, asset managers and life insurers have been “very vocal about their commitment to the UK”.
It says a quarter of the 47 major investment banks covered by the survey “have made public commitments to maintain a presence in the UK”, although they have “raised the possibility of reviews of the restructuring of operations in the UK and these potential reviews seem to be contingent on passporting”.
Passporting is where UK-based financial services firms, particularly investment banks and asset managers, are allowed to operate across the EU from their UK home.
“Five of the 20 largest global investment banks have explicitly cited passporting as a crucial factor in their decision-making about the scale of their presence in the UK,” the EY Brexit Tracker says.
By contrast, it says the key issue for retail banks appears currently to focus on EU workers’ rights. “Two of the “Big Five” high street banks have explicitly called for clarification on EU workers’ rights in the UK following the referendum result.”
It adds that since the June referendum 40 per cent of the UK’s largest insurers have said that the Brexit vote will not have a material impact on their business, with more than 10 per cent identifying potential positive opportunities.
Omar Ali, UK financial services leader at EY, says: “The impact of the second order effects of the referendum result - lower interest rates for longer and the prospect of slower economic growth - were not reflected during the recent earnings season for financial services companies.
“That said, it is reassuring to see that companies across the sector ‑ particularly within the insurance community ‑ seem broadly confident in the ability of their business to weather the initial storm.”
However, it comes as another report out today from business advisory major PwC says that while Scottish small businesses are looking to “post‑Brexit opportunities” 36 per cent of Scottish SMEs “expect prices to rise”.
PwC’s My Financepartner arm says 48 per cent believe business costs will rise and 36 per cent “plan to put recruitment plans on hold”.
The survey says amid post-Brexit trade negotiations 59 per cent of Scottish SMEs believe Germany is the top priority export market, with France and Ireland at 8 per cent each.