Article 50 triggered - PwC comments on what it means for UK industries
Published at 15:23 PM on 29 March 2017
Andrew Kail, head of financial services, said:
"The UK’s financial services industry is incredibly important not only to the UK but to Europe and the rest of the world. The sector added £71.4bn to the UK’s tax revenues in the year to 31 March 2016.
"Now that the starting gun has been fired on Article 50, the UK’s financial industry will have to start adjusting to life outside formal membership of the European Union. It remains critically important that access to markets and customers is maintained both here and overseas.
"Inevitably the full transition to a new regime will take many financial services companies longer than two years, not least because of existing and emerging regulations. The scale and pace of change is unprecedented. Some firms have estimated the changes would normally require between three to five years.
“Financial services companies are becoming increasingly concerned about ‘grandfathering’ the legal and regulatory validity of existing contracts. Plus they have reservations about the time and resources needed to handle the ‘re-papering’ millstone for transferring their clients to new contractual arrangements.
"There may be some genuine bottlenecks in the process such as regulatory licence applications. The situation is compounded by firms dealing with other external demands such as bank ringfencing and MiFID 2 as well wider global uncertainty and ongoing commercial pressures.
“Governments and regulators will therefore need to collaborate and agree appropriate transition plans that provide continuity of existing arrangements and preserve market stability across the UK and the EU27."
Mark Pugh, UK asset and wealth management leader, said:
"The asset management sector is strong, innovative and resilient. The diversity of these global organisations and their contribution to the UK makes the continued success of the sector vitally important.
"The triggering of Article 50 gives asset managers a degree of long-awaited certainty and a set timeline to work towards. Firms must now rise to the challenge and continue to serve their customers with the passion and skill that has made the UK a leading destination for the global asset management industry.
“The time for indecision is over - firms must now firm up their plans for various Brexit scenarios, ensuring their customers remain at the centre of everything they do. It’s important that businesses continue to press ahead with preparations to comply with any EU legislation due to be implemented in the next two years, such as MiFID II.
"We will work with our clients to help ensure that the UK’s transition out of the EU leaves the asset management industry in a strong and enduring position, whatever the negotiations bring."
Jim Bichard, UK insurance leader at PwC, comments:
"The triggering of Article 50 is an important moment for the UK insurance market and for all insurers operating in the UK, Europe and further afield. London is a global centre for insurance and the negotiations over the coming months will be particularly relevant for this industry. Many insurers have used the months following the referendum to make plans and we will start to see these come to fruition in the coming months.
"It is vitally important for insurers to continue communicating regularly with the government, regulators and trade bodies to ensure negotiations with the EU include actions to preserve a healthy and vibrant UK insurance market.
"The UK is a truly global insurance hub. By embracing the changes brought about by Brexit, I am confident it will continue to thrive."
Jane Portas, insurance regulation partner at PwC, commented:
"The UK's insurance industry is incredibly robust and has gone through huge amounts of regulatory change in the past few years. Solvency II and the Insurance Distribution Directive are two key areas on which the industry will be looking for clarity in the coming months. If changes are made to existing and planned regulation, the industry will expect the government to do everything possible to ensure the UK gains some form of mutual recognition allowing for equivalence, and that it remains a global hub for insurance including participation of EU insurers."
Sandra Dowling, UK real estate leader, commented:
"Our Emerging Trends in Real Estate survey revealed confidence in the UK’s ability to weather Brexit, and global investors with broader diverse geographical investments appear relatively sanguine and measured in their view towards the UK's medium to long term prospects.
"The triggering of Article 50 will prompt companies across all industries to think about how Brexit will impact the property they hold or occupy. The real estate industry should use Brexit, alongside wider global political and social changes, as a catalyst for much needed innovation in the UK property market.
"We are living through some very uncertain times from a geopolitical perspective yet, against the backdrop of uncertainty, it is striking how much confidence there is in the real estate market, particularly among global investors. Cross-border capital flows are expected to remain strong throughout 2017.
"It is widely accepted that in the aftermath of the referendum the real estate industry focused too heavily on the UK market and did not consider the implications of Brexit on the European real estate market as a whole. Companies should ensure they view the coming months of negotiations holistically and include Brexit plans in their wider business strategies."
Jo Pisani, pharmaceutical and life science consulting leader, said:
“Life Sciences is a strong and vibrant industry in the UK making a significant contribution to taxes and overall GDP, as well as providing highly skilled employment. In addition, the industry is delivering life-saving and life-enhancing medical technologies.
“While EU transition will inevitably raise some challenges there is a real opportunity for the sector to grasp the chance to reinvigorate the UK industry and to maintain and, even improve, our world leading position."
PwC’s report for the Association of the British Pharmaceutical Industry on the economic footprint of UK life sciences can be accessed here
Energy markets and supply
Stuart Cook, PwC's head of utility strategy and regulation, said:
“The size and lifespan of investments in the energy sector means that decisions taken today will not materialise for years, sometimes decades, to come. Stable regulation and policy is critical, underpinning investment in this sector. This is why, wherever possible, securing early commitments on the status of key energy sector policies and regulation, post-Brexit, should be a priority.
“The UK energy and utilities sector, like many others across the economy, is hoping that Article 50 negotiations will result in as much access to European markets as possible. This includes Europe's energy trading markets, sources of investment funding and the European markets for goods and labour.
“The UK energy market is supported by physical connections with continental Europe through the gas and electricity interconnectors. The status of these interconnectors will be an important feature of the arrangements established with the 27 remaining EU nations. Security of supply and the affordability of energy could be put at risk if Brexit has an adverse impact on the operation of the interconnectors.
“The Government will also need to consider how best to accommodate a large number of EU energy market regulations if we are to successfully tackle the ongoing energy trilemma challenge of affordability, secure supply and decarbonisation.”
Jon Andrews, head of technology and investments at PwC, said:
“Technology is already helping to reshape and rebalance the future of our economy. For post-Brexit success this needs to remain high on the government’s agenda, which means creating the right environment for tech hubs and innovation to flourish right across the UK.
“The UK has the ideal foundations to lead the way on the development and use of emerging technologies and is already world-leading in areas such as Machine Learning. It is encouraging that the government is prioritising this through its Digital Strategy and the investment outlined in the Budget.
“The focus now should be on creating a flexible regulatory environment, establishing a favourable immigration regime, providing lifelong skills learning for everyone and investing in emerging technologies research. This will be more important than ever in the post-Brexit environment.
“Given the fast-paced nature of change, it’s vital that the government creates the right framework that is flexible enough to support the UK’s vision to be the leading place for technology investment and innovation - now and in the future.”
Katherine Howbrook, PwC media relations, Tel: 020 7212 2711/07595 609 737, Email: email@example.com
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