A study from market insight firm Mlex indicates that being deprived of of so-called ‘financial passporting’ rights once the UK exits from the EU will have a corresponding effect on the whole UK, not only banks and insurance companies,
Mlex has composed a list of all 13,500 companies using financial passporting in some form in relation to the UK, and has concluded that all kinds of businesses from newspapers to removals companies, could be struck if Brexit causes the loss of the financial passport.
The passport a chain of interconnected pieces of law enabling financial institutions to conduct businesses across borders in the EU with few legal limitations.
Current EU legislative system enables European institutions to run branches in the UK that without the need for them to be separately capitalised from the parent company abroad. In a related vein, non-EU companies can use their London subsidiary to conduct operations across the EU. This has made London the major global financial centre.
However, according today from Mlex, which was obtained via Freedom of Information Act request, the passport does not give privileges to financial services companies only. Here are 3 examples of the non-banking institutions holding passporting rights:
The Society of Auricular Acupuncture — An institution that represents acupuncturists holding passporting rights with regards to insurance.
Telegraph Media Group — The publisher possessing an insurance-brokerage passport.
U-Hire — A construction plant rental company that facilitates diggering rentals is also the owner of an insurance-brokerage passport.
The use of the “passport,” enables London-based companies to access the EU single market of 28 nations. If Britain exits from the EU, the rights might be lost.
Jens Weidmann, the chief of Germany’s Bundesbank warned this September that Britain wouldn’t be getting any special deal from the EU on so-called “passports”, and if it wants to preserved them, will have to allow free movement of citizens from EU nations.
Weidmann told The Guardian that “passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area.”
If the government opt for a “hard Brexit” option, Britain will be most likely deprived of passporting rights.
The government, however, seems to give little importance to preserving passporting rights, giving priority to controls on immigration, and global trade deals rather than keeping financial services in the country.