Leaving the EU: Financial Services

Adrian Bailey Excerpts

Thursday 3rd November 2016 Commons Chamber

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this debate. It is most important that we set the right tone for it: we must not let the events of 2008, with scandals about bankers’ bonuses and so on and so forth, detract in any way from the economic significance of this sector for this country.

My hon. Friend outlined many of the economic statistics underlining that argument, but we must be quite clear that, with more than 2 million people employed in the sector—not least the 300,000 people in my neighbouring town of Birmingham in the west midlands, where about 10% of jobs are dependent on this and related industries—it is hugely important for employment. It is also hugely important to the many people who benefit from the financial and insurance services that this industry delivers, and to the recipients of domestic or business loans who depend on it for the quality of their standard of living or for the economic performance of their area.

My hon. Friend has outlined the significance of passporting. I would like to amplify that. It is very interesting that a country such as Switzerland, which is synonymous with finance and financial management, has no passporting rights in the EU and, as a result, bases many of its companies and activities in London in order to get that access to the EU. The fact that one of the historical major global financial centres of the world is working through London to access the system underlines the sheer strategic importance of our maintaining our access in the negotiations.

I have heard the argument that because more EU companies use passporting to gain access to the UK than the other way around there is an equivalence of interest—the “we’ll be all right on the night” argument. But that does not take into account the fact that the negotiations will be carried out by politicians looking at political issues rather than company representatives looking at the bottom line of their finances. It could well be that issues such as the single market will be debated and negotiated in such a way that other EU countries will use them as the justification for refusing access to passporting.

My hon. Friend the Member for Leicester West outlined the significance of the free movement of labour in the financial services industry. We could end up hitting ourselves twice—first by objecting to free movement of labour, which would be damaging to the financial services industry, and then by having that objection used by EU negotiators as a justification for ending the passport regime. The Government have to handle this incredibly delicately, with maximum support from the financial services industry, to arrive at a solution that will not be doubly damaging to the industry.

In the short time remaining I will mention something that is perhaps not so directly relevant to passporting within the EU but is relevant to financial provision in this country. The mutual sector contains companies that are often small and do not have or need passporting because they do not trade in Europe. Those companies have often been burdened by what they perceive as an EU-level of regulation. Now, I often think that it is our own regulators who needlessly apply the regulation, but that is a different debate. However, on coming out of the EU the argument about EU regulation can no longer be used. I look forward to seeing this country looking at its regulatory regime for those companies that trade only domestically and do not have or need passports, to ensure that we develop a regulatory system that is far more proportionate, and enables small financial services to thrive and provide better consumer options.