Brexit and the Single European Financial Market

Brexit raises a set of important questions with reference to the Single Market, especially in financial services. What are the implications of Brexit for the UK and its financial industry; and what are the implications of Brexit for the EU and the single financial market? This topic is examined in four consecutive steps. We first discuss the UK’s influence in the development of the single financial market, including EU financial regulation, over the past two decades – and thus both prior to, and after, the international financial crisis. This overview is necessary in order to grasp the potential implications of Brexit for the UK, the EU and their financial industries – examined in the second step. We then examine the so-called safeguards secured by the UK government from the EU in the run up to the Brexit referendum and the position of the UK’s financial industry during the Brexit campaign and after the referendum. Finally, we review the post-Brexit options available to manage the relationship between the UK and the EU, specifically with regard to finance. It is argued that that the UK has been a key player in the development of the single financial market, especially prior to the international financial crisis, and has greatly benefited from it. The – at times considerable – British influence made EU financial regulation more market-friendly and open to third countries than it would have been otherwise. The EU–UK agreement signed prior to the Brexit referendum contained several clauses concerning economic governance, including non-discrimination provisions for the financial industry based in the UK. However, these provisions mainly reflected the status quo and re-stated existing commitments. The City of London and British financial industry were mostly in the pro-Remain camp during the referendum campaign – albeit there were some noteworthy financial sector supporters of Brexit. Following the June referendum, the City unsuccessfully mobilized in order to retain full access to the single financial market – the alternative options were considerably less appealing for the UK financial industry.