Brexit and Financial Services

Forthcoming, Oxford Review of Economic Policy (Brexit Special Issue)

21 Pages Posted: 5 Jan 2017 Last revised: 6 Jan 2017

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: January 2, 2017


Financial services constitute an important net export for the UK economy, for which the rest of the EU is the largest market. This paper considers the likely consequences of Brexit for this sector. A ‘soft’ Brexit, whereby the UK leaves the EU but remains in the single market, would be a lower-risk option for the City than other Brexit options, because it would enable financial services firms to continue to rely on regulatory passporting rights. Under a ‘hard’ Brexit scenario, where the UK leaves the single market, the UK might in principle be able to benefit from the EU’s third country ‘equivalence’ frameworks for financial services, but these are cumbrous and incomplete alternatives to passporting. UK firms would find it considerably more costly to export to the EU. This would also be a loss to the EU27, because the UK specialises in capital markets services for which the EU, over-reliant on banking, recognises a need. However, much of this ‘UK’ activity is provided by subsidiaries of US-headquartered groups. In the event of hard Brexit, these firms may be able to compete just as effectively from New York as from London. If ‘soft’ Brexit proves politically impossible, it seems highly desirable that the UK push for a transition period of continued EU membership pending at the very least completion of equivalence determinations and more usefully, the conclusion of a suitable bilateral agreement.

Keywords: Banking, Brexit, Capital Markets, CMU, Financial Services

JEL Classification: F36, F55, G18, G28, G38, R11

Suggested Citation

Armour, John, Brexit and Financial Services (January 2, 2017). Forthcoming, Oxford Review of Economic Policy (Brexit Special Issue), Available at SSRN:

John Armour (Contact Author)

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom
+44 1865 281616 (Phone)


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics