By Chris Cummings, Chief Executive of TheCityUK
TheCityUK has just launched its research on the views of the leaders of financial and related professional services on the UK's membership of the EU and the Single Market. This is the first research with a truly cross sectoral perspective and breadth, which reveals the most detailed analysis yet on how our leaders really feel about Britain's relationship with its European neighbours. Over breakfast at the offices of our kind hosts Clifford Chance in Canary Wharf, we explored the results in more detail.
There are few other issues of such importance at the moment as our future relationship with Europe. It has a huge impact on the UK economy in terms of jobs, growth and competitiveness, and we feel it's vital the voice of financial and related professional services is heard.
Why is our voice so important? The financial services sector in the UK attracts more foreign direct investment than any other, and the UK attracts more foreign direct investment than any other EU member state. With a 13% contribution to GDP and gross value added per employee at £95,000 the sector benefited from £63bn in tax take in the last year alone.
A vital point to make is that over £20bn of that £63bn comes from internationally mobile firms who have chosen the UK has a base. And why do these firms choose the UK? Our research tells us the most commonly cited reason is easy access to the Single Market.
Furthermore, the EU remains our largest market. UK exports of financial services to the EU totalled £20.4bn in 2012, more than double the amount recorded in 2005.
But let's not forget that this relationship is not all about the UK. It's a two-way thing. London isn't just the UK's financial centre, it's the EU's financial centre too. Too often in this debate, that critical point gets lost. 79 of the 251 foreign banks based in the UK are from the EU, and EU banks hold nearly £1.4tn in assets in the UK. The UK leaving the EU or the Single Market would have huge repercussions for each EU member state, not just the UK itself.
With that in mind, our research is an important milestone in the debate. With the support of Ipsos MORI, our sector leaders have contributed to this study by contributing openly and frankly about their concerns, and how the EU could operate better.
You can find a more detailed summary of what our research has uncovered in our news section, but here are a few of the headline findings:
- 84% of business leaders would prefer to remain in part of the EU, and 95% say access to the Single European Market is central to the competitiveness of the UK as a financial centre.
- Nine out of ten said the UK's decision on EU membership will be important for the future of their business here
- But, reform of the Single Market is a recurrent theme. There is significant concern about over-regulation; over half of leaders worry about the volume of legislation while 6 in 10 cite regulatory change as the greatest challenge for their business
We also heard from Dr James Nixon, TheCityUK's Chief Economist, on the economics of an EU referendum. He made a salient point, which is that in the debate over EU membership, economics should have something to say. That's because the growth in financial and related professional services in this country over the last two decades is closely linked to the UK's membership of the EU, and the benefits of EU membership are numerous, not least in the gains we make from trade, increased competition, and by providing access to the world's largest market. As James pointed out, the UK is the most important market for a number of EU economies.
Over the last couple of years, TheCityUK has produced a wealth of reports and analyses of the economic relationship between the UK and Europe, and you'll find them all if you click here and it is our belief that when looking at the cost benefit analysis of EU membership it's vital we take a long term view of things. That means building long term benefits for the UK, which deliver a long term competitive advantages for our economy. It's an important point, and one that is driving our ongoing research into the extensive links between financial markets in the UK and EU.
The EU and Single Market membership matters – not just to business, but to the public too. European Commission figures suggest that completing the Single Market could create 2.75million more jobs across the continent. Few things mean more to people than seeing good jobs being created in their hometown. Secondly, an open, outwardly looking, dynamic and globally competitive EU will benefit every one of its citizens, including in the UK. But we need a seat at the table to make sure it happens and that we share in the potential benefits.
Over the coming months TheCityUK will be releasing more research and analysis into the UK's relationship with the EU. But we'd love to hear your views too. If you'd like to get in touch, please do contact us.