As Prime Minister Theresa May prepares to deliver her final ‘Road to Brexit’ ministerial speech, the Chartered Insurance Institute (CII) has urged the Government to publish its long-awaited Brexit position paper on financial services as the insurance and financial planning profession divides over its desired future regulatory relationship with the EU.
New research from the CII member economic outlook and Brexit survey published today reveals that the insurance profession is divided almost perfectly down the middle when choosing between positioning the sector as an international financial centre with lighter touch regulation and supervision (33%) or remaining close or ‘equivalent’ to the EU (36%).
This division is set against a backdrop of a notable improvement in economic and business sentiment across the profession compared to the CII member survey published last year, which had registered a dramatic drop in confidence in the future of the UK economy following the referendum result.
A third of survey respondents now expect economic and business prospects to improve compared to 23% a year previously, and just under a third (30%) of members now expect the UK economy to deteriorate in 2018, compared to 48% that expected decline 12 months ago.
This upturn in confidence in economic and business conditions is tempered however by an unease about the fate of the UK insurance and financial planning profession post-Brexit. CII members consider Brexit to be the biggest risk to the profession (30%) followed by cyber security (21%).
In addition, more than twice as many CII members surveyed would consider a second referendum to be beneficial (37%) for their firm than those that think it would be damaging (15%). Furthermore, nearly a quarter of senior directors (22%) believe it’s likely or highly likely that their firms will move operations out of the UK in the event of a ‘no deal’ outcome to Article 50 negotiations.
“We are pleased to see that economic confidence across the insurance and financial planning profession has partially recovered since last year’s CII member survey,” said Matt Connell, director of Policy and Public Affairs at the CII. “We consider this healthier sentiment testament to the commitment first made by the Prime Minister in her Mansion House speech to provide business and the wider public with as much certainty and clarity as possible throughout the Article 50 negotiations.
“However, our research demonstrates that the profession is divided over the nature of the regulatory relationship it believes the UK should seek with the EU post-Brexit. This reinforces the desperate need for the publication of an analysis of the impact that different negotiation outcomes would have on significant areas of the economy.
“The financial services sector has also expected a position paper from the Government at the very least. Outlining a vision of what the Government’s desired end state is for the sector need not undermine the UK’s negotiating position - just as the publication of position papers for 14 other areas of the economy has proved. We call on the Government to continue to honour the pledge first made in the Prime Minister’s Mansion House speech to provide clarity where possible by publishing its assessment of the impact of different negotiation outcomes on the economy, and to clarify the nature of the future relationship it seeks with the EU, particularly in relation to financial services.”
Commenting on the survey results, Rt Hon Hilary Benn MP, chair of the Select Committee on Leaving the European Union said: “There is now an urgent need for clarity from the Government as to what kind of future economic relationship with the EU it will seek. This must include the Government’s plans for financial services which need to be published without delay.”
Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee commented on the absence of a Brexit position paper on financial services. She said: “The failure to publish a position paper on financial services sends all the wrong signals. Financial services will be one of the most challenging elements of the Brexit negotiations. A paper articulating a clear sense of direction, and a desired end-state, could have boosted confidence that the Government is up to the task. Some level of clarity has been provided for numerous sectors. Financial services firms will be seriously concerned at the chronic state of uncertainty.”
The CII Member Economic outlook and Brexit survey is the sixth annual wave of the CII Member Survey conducted in partnership with the Centre for Economic and Business Research (Cebr). Analysis is measured against economic and employment prospects indices first developed in 2011. The responses from 3,881 CII members were received in November 2017.