Myth: City will thrive if we quit EU
InFact: If we lose full access to the single market, financial institutions based in the City of London will probably lose the passport that lets them operate freely across the whole EU. Banks will have to shift part of their business elsewhere in Europe, meaning we’ll lose high-paid jobs and the taxes that go with them. Even losing a fraction of this money-pot would be damaging – financial services account for nearly 10% of our economy and 11% of taxes.
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This article is an adaptation of a piece that previously appeared on InFacts.
Hugo Dixon is the author of The In/Out Question: Why Britain should stay in the EU and fight to make it better. Available here for £5 (paperback), £2.50 (e-book)
Edited by Hugo Dixon
Passporting bank deposits cuts both ways. Remember the Icelandic Banks? They were passported to take UK deposits so we had to go to Iceland for our depositors to get the money back when they went bust. Remember when Iceland held a referendum and the Icelandic people mandated its Government to refuse to honour their liabilities? After a fight we got it back. If you want to know what fight looks like read “Back from the Brink” by Alistair Darling
Until the result of the referendum is known, I am not depositing with EU banks passported to take deposits in the UK as I might have to go back to them after 23.03.16 when we are no longer a member of the EU and claim compensation in which I assume their interest would be disappointingly low. Only EU banks covered by the FSCS with branches in the UK will get my money if necessary.
More to the point, it is doubtful whether money will flow to us from the EU if we are not a member for our financial services, especially from the Eurozone as they may well prefer to transact within their own free market area and their own currency area.