Capital Economics Says Brexit Would be Better in the Long Term

Britain’s financial services sector could retain its pre-eminent global position even if voters opt to leave the European Union, according to a leading economics consultancy.

The potential impact of Brexit on the Square Mile is likely to be a key factor shaping the government’s thinking as it seeks to renegotiate Britain’s relationship with the EU in the coming months. But Vicky Redwood, UK economist at Capital Economics, said her analysis suggested the short-term costs could be outweighed by longer-term benefits.

“A British exit from the EU would probably hurt the City in the short term, but it would not spell disaster,” she said in a research note.

“The City’s competitive advantage is founded on more than just unfettered access to the single market. And an EU exit would enable the UK to broker trade deals with emerging markets that could pay dividends for the financial services sector in the long run.”

British exports of financial services to the EU were worth £19.4bn in 2013, against imports of just £3.3bn.

Redwood warned that up to half of those exports could be at risk in the short term as Britain surrendered the “passporting” rights that enable UK-based businesses to sell to consumers throughout the EU.

Via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza