UK as a Financial Services Hub — [Graham Stringer in the Chair]

Part of the debate – in Westminster Hall at 10:30 am on 6th February 2019.

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Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 10:30 am, 6th February 2019

Congratulations to Bim Afolami for bringing the debate. It is important that we talk about the UK as a financial services hub, the contribution to the economy, and the number of jobs in this area.

At lot of the statistics have already been discussed, and as time is relatively short, I will not go over them. I would like to mention Edinburgh, which is the largest financial services centre in the UK after London. It is also a major European centre for asset management and asset servicing. It has been at the forefront of the life assurance market for more than 200 years, which is pretty impressive. Think about the depth of knowledge that companies have developed over 200 years of providing services to people in the asset management space. In 2017, around 33,000 people were working in Edinburgh’s financial services and insurance sector, which is a significant proportion of the population of not only Edinburgh, but Scotland.

Within Scotland, the financial services sector is not confined to Edinburgh. Large banks have technology hubs in Glasgow, and Aberdeen has financial and professional services jobs, for example in major accounting firms that are servicing the oil and gas industry. As the hon. Member for Hitchin and Harpenden said, this is not exclusively a London thing. When reading the stats, I was surprised to find that 50% of jobs in financial services are outside London. I had expected the sector to be more London-centric, so it was interesting to read that, and to think about the vast numbers of people in the sector; we know how many people in London work in financial services, but there are a significant number of people doing so outside the City as well.

I will focus on Brexit, as Members would expect, given that the Scottish National party is the party in this place that has consistently and vociferously opposed any Brexit. We have said that if we are to have any Brexit, we need full single market and customs union membership, which would protect our right to access some of the services that we would be able to have post EU exit.

Financial services firms and their money are leaving the UK because of Brexit; they are genuinely voting with their wallets. Since the 2016 referendum, $1 trillion-worth of assets have been moved from the UK to the rest of Europe according to Ernst & Young, which is a significant amount of money. According to Bloomberg, Deutsche Bank AG is repatriating at least €400 billion to Frankfurt; JP Morgan is taking €200 billion there, Goldman Sachs €60 billion, Citigroup €50 billion and Morgan Stanley €40 billion. Those are significant amounts of money.

Bloomberg has said that London could lose 10,000 banking jobs and 20,000 jobs in wider financial services. To put that in context, professional services represent 12% of the contribution to the British economy. Losing those jobs in financial and professional services, losing that investment, and losing the centres of large financial services organisations as they move would be a significant hit to the Treasury.

When we have discussed Brexit in this place, we have not had enough discussion of services. We have had in-depth discussion about tariffs, for example, but if we think about the contribution made to the economy by services, compared with the export or import of goods, services are a huge part of the economy. It surprised me that when the UK Government set out on the path of trying to work out which Brexit would suit, they did not say, “We are going to bat for services. Services are the key thing that we will put front and centre, and we will fight for access to services markets.” That would have been a far more sensible option for the Government than saying, “The most important thing is clamping down on freedom of movement. We are happy to ditch our access to services markets, simply so that we can get rid of our citizens’ right to freedom of movement.” That was an incredibly poor decision, and we will all pay the price.

On the impacts on the single market and our options— I am aware that there is not a huge amount of time, so I will whizz through this—one of the biggest concerns raised is data transfer post Brexit, whether there is a deal or a no-deal Brexit. There are issues to do with compliance with the general data protection regulation. For example, if a motorist crashes their car in Europe and they are insured by a UK firm, it is important that the data can be transferred, so that the claim can be paid. If there are barriers in place because we are outside the single market, or because we are outside the GDPR regime as it is set up in Europe, that is a major issue for ensuring that those claims are paid.

I have tackled the Government about the lack of reciprocity in some of the secondary legislation that has been brought in. They had immediately assumed that we would not have reciprocal arrangements with the EU in a no-deal scenario, whereas I come from the point of view that we should always have reciprocal arrangements with the EU. Once there was regulatory divergence, a further statutory instrument could be laid before Parliament to change the position around reciprocity. It concerns me that the Government have refused to do that.

I will focus briefly on people, as the issue was brought up a lot in the debate. In some sectors of the capital markets, EU27 citizens account for as much as a quarter of all staff in the UK. That is a significant stat. If the UK Government’s settled status scheme makes people feel unwelcome, and they therefore choose to go back to the EU country where they were born, that is a major concern. There is another issue around short-term visas. A lot of large companies have bases in other countries and require people to come over for a short period. The UK Government have suggested that the visa scheme will allow for 12-month visas; somebody might only be here for three months, and then the company might want somebody else for three months. That causes a real problem for companies, with regard to ensuring flexibility in their workforce.

To sum up, everything relating to Brexit that the Government have decided on has been disadvantageous to financial services. Anybody who talks about a low tax, low regulation system causes me major problems; I have real issues with that. For 20 years of my life, Scotland had a Conservative Government for which we did not vote. Conservative Back Benchers are talking about a low tax, low regulation system that we have not voted for. I wonder why people—and the Government—cannot understand why Scotland wants to be an equal partner in the EU, rather than a member of the UK, where we are having these things done to us against our will.