Sir Mark Boleat, former policy chairman of the City of London Corporation, gave a fascinating talk on how he sees the fallout of Brexit impacting on London’s financial services industry at the Cass Business School last week.
Mark will be familiar to many in Jersey, and it will come as no surprise that his verdict was clear and blunt. It is his opinion that the UK is unlikely to receive any special treatment after the Brexit transitional period in terms of access to the EU’s financial markets, and that could mean the potential loss of some 75,000 jobs and £100 bn in tax revenues in the UK.
So how concerned should we be about these UK forecasts in relation to Jersey’s finance industry? What they do emphasise is just how important it is for the Island to fully understand the scale of the challenges that the new context of Brexit presents.
The reality is that there is uncertainty over Britain’s financial future as a result of Brexit – Mark didn’t shy away from that. We are now two years on since the referendum and we are still awaiting clarity on what the relationship between the UK and the EU will look like. A wide range of possibilities is still open, ranging from a ‘hard Brexit’ with no access to
the EU for financial services firms (his worst-case but most likely scenario)
to some form of single-market access.
Depending on the outcome, the UK may, in the short to medium term, become less attractive as a recipient of international capital.
A large proportion of investment flows channelled through Jersey are invested in the UK, so it is clear that we should be thinking ahead and planning for such an impact.
The good news is that a lot of scenario planning has been carried out with precisely these sorts of challenges in mind, with government, regulator and industry all working together on a shared strategic vision that aims not only to minimise the negative impacts of Brexit, but to capture opportunities it presents too – while maintaining a focus on overseas growth markets that are unaffected by Brexit.
Not many other jurisdictions of our size have been so joined-up or sophisticated in their approach, so we are in a good place.
For instance, investors and businesses are likely to seek jurisdictions that can offer greater stability and certainty in the light of Brexit – putting Jersey’s stable political and financial environment in a positive position.
Jersey’s well-established ‘third country’ status in relation to the EU stands us in good stead too. Within the funds arena, we see real opportunity for Jersey to support non-EU (including UK) fund managers with access to EU investor capital through our tried-and-tested private-placement regime.
Moreover, it may well be that the UK leaving the EU will have long-term positive effects for the UK economy. Jersey and the UK have historically worked closely together, with the UK remaining Jersey’s most important trading partner. If the UK fares well in the long term, so can Jersey, but it is really important to put the work in now to support this positive relationship in the future.
Mark raises some important points about the realities of Brexit, but it is vital to remember that Jersey has had phenomenal success operating as a third country in relation to the EU and as a close trading partner with the UK.
If we can all pull together – and that includes firms, industry bodies like Jersey Finance, government and regulator – and focus on the Island’s core position as a tax-neutral jurisdiction that channels good-quality investment flows, then we can be in a strong position to continue to prosper within the new contexts of Brexit.
