CII urges publication of Brexit financial services position paper

• CII members are split down the middle over the desired UK-EU future regulatory relationship with the EU post-Brexit.
• This division is set against a backdrop of a notable improvement in economic and business sentiment since the last annual survey of the profession.
• The insurance and financial planning profession is united in considering Brexit as the biggest risk to the sector, followed by cyber security.
• Nearly a quarter of Senior Directors surveyed believe it is likely or highly likely that their firm will move operations out of the UK in the event of a ‘no deal’ scenario.
• More than twice as many CII members would consider a second referendum to be beneficial for their firm as those who think it would be damaging.
• CII urges Government to clarify its stance on financial services in Brexit negotiations and calls for the publication of the leaked ‘EU Exit Analysis - Cross Whitehall Briefing’.

As Prime Minister Theresa May is set to announce more detail on the Government’s Brexit negotiating stance in the final ‘Road to Brexit’ ministerial speech, the Chartered Insurance Institute (CII) urges the Government to publish the long-awaited Brexit position paper on financial services as the insurance and financial planning profession divides over its desired future regulatory relationship with the EU.

New research from the CII member economic outlook and Brexit survey published today reveals that the insurance profession is almost perfectly split down the middle when choosing between positioning the sector as an international financial centre with lighter touch regulation and supervision (33%) or remaining close or ‘equivalent’ to the EU (36%).

This division is set against a backdrop of a notable improvement in economic and business sentiment across the profession compared to the CII member survey published a year earlier, which had registered a dramatic drop in confidence in the future of the UK economy following the referendum result. 33% of survey respondents now expect economic and business prospects to improve compared to 23% a year previously, and just under a third (30%) of members now expect the UK economy to deteriorate over the coming year, compared to 48% that expected decline 12 months ago.

This upturn in confidence in economic and business conditions is tempered however by an unease at about the fate of the UK insurance and financial planning profession post-Brexit. CII members consider Brexit to be the biggest risk to the profession (30%) followed by cyber security (21%). More worryingly, more than twice as many CII members surveyed would consider a second referendum to be beneficial (37%) for their firm than those that think it would be damaging (15%), while significantly, nearly a quarter of Senior Directors (22%) believe it is likely or highly likely that their firm will that their firms will move operations out of the UK in the event of a ‘no deal’ outcome to Article 50 negotiations.

Matt Connell, Director of Policy and Public Affairs at the CII said:

“We are pleased to see that economic confidence across the insurance and financial planning profession has partially recovered since last years’ CII member survey. We consider this healthier sentiment testament to the commitment first made by the Prime Minister in her Lancaster House speech to provide business and the wider public with as much certainty and clarity as possible throughout the Article 50 negotiations.

However, our research demonstrates that the profession is divided over the nature of the regulatory relationship it believes the UK should seek with the EU seek post-Brexit. This reinforces the desperate need for the publication of an analysis of the impact that different negotiation outcomes would have on significant areas of the economy.

The financial services sector has also expected a position paper from the Government at the very least. Outlining a vision of what the Government’s desired end state is for the sector need not undermine the UK’s negotiating position - just as the publication of position papers for 14 other areas of the economy has proved. We call on the Government to continue to honour the pledge first made in the Prime Minister’s Mansion House speech to provide clarity where possible by publishing its assessment of the impact of different negotiation outcomes on the economy, and to clarify the nature of the future relationship it seeks with the EU, particularly in relation to financial services.”

Commenting on the survey results, Rt Hon Hilary Benn MP, Chair of the Select Committee on Leaving the European Union said:

“There is now an urgent need for clarity from the Government as to what kind of future economic relationship with the EU it will seek. This must include the Government’s plans for financial services which need to be published without delay.” 

Commenting on the absence of a Brexit position paper on financial services, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee said:

“The failure to publish a position paper on financial services sends all the wrong signals. Financial services will be one of the most challenging elements of the Brexit negotiations. A paper articulating a clear sense of direction, and a desired end-state, could have boosted confidence that the Government is up to the task. Some level of clarity has been provided for numerous sectors. Financial services firms will be seriously concerned at the chronic state of uncertainty.”

The CII Member Economic outlook and Brexit survey is the sixth annual wave of the CII Member Survey conducted in partnership with the Centre for Economic and Business Research (Cebr). Analysis is measured against economic and employment prospects indices first developed in 2011. The responses from 3,881 CII members were received in November 2017.