Leaving the EU: Financial Services

Debate between William Cash and Chris Evans

Thursday 3rd November 2016 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

I begin by congratulating my hon. Friends the Members for Nottingham East (Chris Leslie) and for Leicester West (Liz Kendall) on bringing forth this timely debate. They are both known as having been huge talents, and their absence from the Front Bench is unfortunate.

I come to this debate with a sense of frustration. Like the hon. Member for Tonbridge and Malling (Tom Tugendhat), I worked in financial services for a number of years before I came to this place. I get frustrated when I hear politicians characterising bankers as greedy, yacht-going men who live in high-rise apartments, looking for ways to rip off the British public to make themselves even richer. That is not my experience of the banking system, and it is not the experience of the people I meet in my constituency, such as those who work on the high street in Blackwood or people such as Jonathan Brenchley from Barclays, a community relations manager who works hard to improve community relations. I recently had a meeting with NatWest, which is trying to improve IT and promote small IT businesses so that they can grow in Wales.

It is true that financial services are the largest exporters in the world. Some 11.8% of our GDP is in the financial and related sectors. The financial industry employs over 2 million people, and not all of them are based in the City of London. It employs one in 14 people in the UK on average, and two thirds of them are based outside Greater London. In Wales, for example, 54,300 people are employed by the financial and professional services industry. These are people who really believe in their companies; they have a buy-in, and they want to provide the best possible customer service. That is why I am concerned.

Before the referendum of April 2016, PricewaterhouseCoopers conducted an analysis of what effect leaving the European Union would have on the financial services sector. The outcome was grim, forecasting that leaving would result in the loss of 70,000 to 100,000 jobs by 2020, with a slight recovery over time, but remaining with a loss of 10,000 to 30,000 jobs by 2030.

As we have heard, work in the financial services industry involves helping businesses to grow and individual people to reach their potential. Suffice it to say, it is the base industry for everything in this country. The prospect of the UK leaving the EU is a real threat to the financial services industry. Our financial services industry does not operate in a vacuum; rather, it relies on international trade and the flow of capital around the world and particularly the EU.

At the moment, the sector makes extensive use of passporting, as we heard from my hon. Friend the Member for Leicester West. The Treasury Committee’s publication of figures from the Financial Conduct Authority shows that 5,476 companies registered here in the UK depend on these passport rights to do business with the EU.

[Sir William Cash]

In the light of the hon. Gentleman’s condemnation of the vote to leave, will he remind us how his constituents voted in the referendum?

[Chris Evans]

The hon. Gentleman has spent 30 to 40 years in this House going on about the European Union. All his birthdays must have come at once on 23 June—that is all I can say! [Interruption.] He knows the answer very well. I think he is trying to create a bit of mischief for me.

Essentially, we need to ask whether this will mean the loss of passport rights. What structures will be put in place to allow people to continue doing business and paying their taxes? Banks and the financial service industry simply need to know that.

I am short of time, but let me say that my second key concern that generates uncertainty is the extent of EU-originated law that now governs financial services. The law itself, of course, is not the issue, but what replaces it and the process by which it will happen is still a mystery. It is hard to find reliable information to quantify the extent to which EU law governs the UK financial services sector. However, since the EU implements many international regulations and agreements relating to the financial services sector and the UK relies on that body of law, leaving the EU can raise questions.

Ultimately—I am running short of time—it is no good for the Prime Minister to come here and, when she is challenged, to say every week, “Brexit means Brexit.” It is no good her saying that she is not going to give a running commentary on the negotiations either. The financial services industry needs certainty. It needs to move on, and it is time that the Government came up with some answers to the questions I have raised today.