UK financial sector moves focus from EU to US

A new report by financial services industry body TheCityUK has revealed that the United States has replaced the European Union as the main destination for the United Kingdom's exported financial services sector in the aftermath of Brexit.

The report showed that in 2020, the year which saw a transition period following the UK's departure from the EU and ended with the formalization of the Brexit agreement, 34.2 percent of exports went across the Atlantic, as opposed to 30 percent going to the 27-member European bloc.

The year-on-year total going to the EU was down 6.6 percent, but overall, exports to non-EU countries went up by 4.1 percent, and for the US in particular, the figure was 5.3 percent.

The value of financial services exports to the EU fell by 24.7 billion pounds ($32.6 billion) while exports to countries outside the bloc went up to 57.7 billion pounds.

"This report demonstrates the resilience and adaptability of the industry in the face of acute challenges and changes brought about by both Brexit and the pandemic," said Anjalika Bardalai, chief economist and head of research, TheCityUK.

The financial services sector was left out of the December 2020 Brexit agreement because of a lack of clarity at the time over how the UK intended to conduct its business post-Brexit.

Recently, the European Commission has spoken about closing loopholes enabling companies based outside the EU from taking advantage of local rules to continue trading within it, something that could potentially limit London's access to European markets.

Last month, Brexit minister David Frost predicted this situation was unlikely to improve any time soon, with the UK being "unlikely to get extensive equivalence (on financial services) from the EU in the next year or two". Government policy, he added, was now "to work on that assumption".

"The UK's status as a world-leading financial centre is at risk unless industry, government and regulators work together to boost long-term competitiveness, deepen key trade links, and focus on new areas of future global growth," Bardalai added.

Trystan Tether, a lawyer at legal firm Bird & Bird, that specializes in the tech sector, told the Daily Telegraph that there had also been significant US investment in the UK financial technology sector, which he said indicated that "the UK continues to represent an attractive market".

Based upon figures released by the Office for National Statistics, the Telegraph also calculated that 2020's trend of the trade balance tilting across the Atlantic would continue in 2021, with figures for the first six months of the year showing that financial sector exports to the US so far totaled just under 15 billion pounds, as opposed to less than 11 billion going to the EU.