Finance services

The United States has become Britain’s largest financial services export as Brexit approaches


Amid all the woes and challenges presented by the pandemic, the first half of 2021 saw the UK’s banking sector happily flourish to the tune of £ 10.3 trillion, making it the most prosperous in Europe and the third in the world. The coronavirus has had many effects around the world, including highlighting the resilience of the UK financial sector. Experts are pleasantly surprised to see the financial sector reacting positively to the pandemic.

Last year fintech played an important role in the UK economy, generating £ 6.6bn in revenue while creating 76,500 jobs. Overall, the UK financial services sector enjoys a healthy trade surplus of £ 45.8 billion, meaning that the services rendered by these companies are in high demand beyond UK borders. United.

Britain’s biggest trading partner was the EU. But then, in December 2020, the result of the 2016 referendum was a departure from the Union. With Brexit, British companies no longer had full access to the European market.

Before December 2020, 35% of UK financial services exports went to the European Union. Since then, however, the percentage has declined. Some say this drop highlights the different value systems that govern the UK and the EU. The latter is mainly concerned with the development of a coherent and internally coherent capital market. For the United Kingdom, Brexit represents an opportunity to regain sovereignty over its financial regulation procedures.

The future of Britain’s trade relationship with the EU is expected to remain divided due to Brexit. Equivalence is a key concept for the EU, and it has failed to achieve a common understanding of tax equivalence with the UK. Had the two sides reached a memorandum of understanding, UK financial institutions would have had free and easy access to the European market.

But as it stands, UK financial service providers do not have the ‘automatic right’ to operate in the EU as they once did. Now suppliers face the tedious task of seeking compliance with individual countries before doing business in the Eurozone.

Despite Brexit, activity in the UK financial sector remains strong. London has the world’s largest share of cross-border bank loans. As the hub of industrious financial turmoil, this is not surprising. The London hub is also doing very well in global currency trading, handling double the amount of dollars the United States makes. In addition to the attractiveness and strengths of the hub, London is ideally placed geographically, as it is in a more user-friendly time zone than its Asian counterparts.

The decrease in trade with the European Union has had additional positive effects for UK financial service providers. These companies have had some success with non-EU countries. £ 40 billion in financial services exports went to countries outside the European Union in 2020. Recently, in the first half of 2021, the UK exported £ 19 billion in financial services – including insurance and pension services – to the United States.

The trend that is catching attention in 2021 is the boom in UK-US trade relations. It surpasses the trade relations the UK previously had with the European Union. According to the Office for National Statistics, £ 15 billion in financial services exports went to the United States in the first and second quarters of this year.

Beyond the obvious effects of Brexit, the rise of British trade with the Americans comes from an additional source. The robust response of the US economy to the pandemic has allowed it to recover faster than most of the world’s economies. The country’s response to COVID-19 has made it an ideal business partner.

The increased appetite for UK financial services has convinced analysts that US companies are increasingly curious about the UK tax landscape.

All of this bodes well for the UK economy, but now is no time to rest on its laurels. Experts seem to be aware of this fact, taking the right legislative steps to ensure the UK remains competitive given the success of established budget leaders like New York.

There is no return to the euro zone for the United Kingdom. The 2016 referendum only highlighted the fundamentally different tax philosophies of the two regions. The EU is moving forward with confidence and committing to creating regulations that will make it much more autonomous than it has been in the past. This will reduce the ease with which the UK – or any other country – can adjust its economy to adapt to new demands.

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