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New ComRes poll finds that 69% of managers at UK finance firms support a British veto on EU financial rules even if it reduces access to the Single Market

14 Dec 2011

Open Europe has today published a new ComRes opinion poll – the first poll to survey managers from UK financial services firms on EU re-negotiation – which finds that seven in ten (69%) financial services professionals support the UK having a veto on future EU financial services regulation even if that risks reducing business opportunities in European markets through decreased access to the Single Market.

500 financial services professionals were polled between 28 November and 7 December, before last week’s EU summit where David Cameron vetoed an EU Treaty change after other leaders refused to insert safeguards on the Single Market and financial services.

As Open Europe sets out in a new report, “Continental shift: safeguarding the UK’s financial trade in a changing Europe”, published last week, financial services remain vital to the UK economy, accounting for a £35bn trade surplus and a £54bn tax contribution last year. Open Europe’s report notes that the EU market – while offering benefits to the UK – is likely to offer limited new growth opportunities for UK financial sector firms, at a time when opportunities elsewhere in the world are on the rise.

- Overwhelming support for a UK veto on EU financial regulation even if it reduced market access to the EU: The ComRes survey finds that 69% of financial services professionals say that they would support the UK having a veto on future EU financial regulation and other financial measures, even if it risked reducing their firm’s market access to one or more EU countries.

- Concerns about the cost of EU regulation: The poll finds that 56% of financial services professionals think that, on balance, the costs of EU financial regulation currently outweigh the benefits of the Single Market to the City, while 31% disagree. Over the next five years, 62% expect the costs of EU regulation to outweigh the benefits of the Single Market, while only 24% disagree.

- 70% think the UK should renegotiate the EU Treaties to safeguard the City: While the Single Market is seen as important, surprisingly, a full 70% think that the UK Government needs to renegotiate the existing EU Treaties to safeguard the City of London, limiting agreements to trade and association only.

- Eurozone-only financial transaction tax (FTT) would have a negative effect on finance firm’s UK operations: Given that the UK and other non-euro countries are opposed to an EU-wide FTT, the likelihood of a eurozone-only FTT being proposed has increased. If the eurozone went ahead with its own FTT, without the UK, finance professionals think this would still have a negative effect on UK firms. 55% say it would have a “negative effect” on their UK operations. If an EU-wide FTT, including the UK, was introduced, 48% of financial services professionals say they would consider moving some of their activities to outside the EU.

- UK regulators are perceived to have a better understanding of financial markets than EU regulators: In contrast to EU-level regulation, financial services professionals are less likely to agree (40%) that the costs of UK-derived Financial Services Authority (FSA) regulation outweigh the benefits, than disagree (47%). Only 22% of respondents agreed that the EU institutions have a better understanding of how financial markets operate than the UK’s FSA, while 62% disagree.

To read Open Europe’s report, “Continental shift: safeguarding the UK’s financial trade in a changing Europe”, please click here:
http://www.openeurope.org.uk/Content/Documents/Pdfs/continentalshift.pdf

Open Europe’s Director Mats Persson said,

“Clearly, even though UK financial firms still consider the Single Market to be important, David Cameron has strong business support in seeking safeguards over EU financial measures in future EU negotiations.”

“What’s certain is that the financial services industry has huge concerns about the cost of regulations coming out of Europe and is also concerned about a financial transaction tax, even if such a tax were pursued only within the eurozone. Whether he was right or wrong in blocking an EU Treaty, Cameron must now continue to work to make sure that new EU regulation does not hinder trade, growth or employment.”

“It is however important that we learn the lessons of the regulatory failures that led to the financial crisis. It’s interesting to see that despite the UK authorities wanting to go further in some areas of regulation, for example on banks holding more capital to protect the economy and taxpayers from further meltdowns, they are still more trusted amongst UK financial players than the EU institutions. This shows that the debate is not about more or less regulation, but smarter control of financial markets and who is best placed to impose that.”

Click here to see a summary of the poll results:
http://www.openeurope.org.uk/Content/Documents/Pdfs/financialservicespoll.pdf

Full data tables can be found at www.comres.co.uk.

Key points:

Methodology:

ComRes surveyed 500 financial services professionals (manager level and above) in London online between 28 November and 7 December 2011. ComRes is a member of the British Polling Council and abides by its rules.

The UK Government should take back more control over financial services regulation

68% of managers at UK financial services firms agree that the UK Government should take back more control from Brussels over financial regulation even if it risks compromising the possibility of easier market access to other European countries, while 22% disagree. Overall, 69% support the UK having a veto on future EU financial regulation and other financial measures, even if it risked reducing their firm’s market access to one or more EU countries.

70% think the UK should renegotiate the EU Treaties to safeguard the City

While the Single Market is seen as important, 70% agree that the UK Government needs to renegotiate the existing EU Treaties to safeguard the City of London, limiting agreements to trade and association only. Just 19% disagree.

A majority think that the costs of EU financial regulation will increasingly outweigh the benefits of the Single Market in the future

The poll finds that 56% of financial services professionals think that, on balance, the costs of EU financial regulation currently outweigh the benefits of the Single Market to the City, while 31% disagree. However, financial services firms are concerned that, in the future, the cost of complying with EU regulations will increasingly outweigh the benefits of being able to do business across the EU. Over the next five years, 62% expect the costs of EU regulation to outweigh the benefits of the Single Market, while only 24% disagree.

In contrast to EU-level regulation, financial services professionals are less likely to agree (40%) that the costs of UK-derived Financial Services Authority (FSA) regulation outweigh the benefits, than disagree (47%).

55% say that a eurozone-only FTT would have a negative effect on their UK operations

If the eurozone went ahead with its own FTT, without the UK, finance firms think this would still have a negative effect on UK firms. 44% say it would have a “fairly negative effect” and 10% say it would have a “very negative effect” on their UK operations. Just 3% say a eurozone-only FTT would have a “very positive effect”, while 13% think it would have a “fairly positive effect”. 18% think it will have no effect.

In a recent interview with the Financial Times, EU Taxation Commissioner Algirdas Šemeta said that a eurozone-only financial transactions tax would be “designed in such a way that it doesn’t matter where transactions are taking place. I think that London will lose out.”

A majority would consider relocating some of their activities outside the EU if an EU-wide FTT is introduced

48% of financial services professionals say they would consider moving some of their activities to outside the EU and 35% would not if an EU-wide FTT, including the UK, was introduced. Overall, 12% would definitely consider moving some or all of their activities. Although it is unclear whether the UK could block a eurozone-only FTT, the UK has the power to block an EU-wide FTT.

In terms of the effect on their firm’s competitiveness, financial services professionals are more concerned about the prospect of an EU-wide financial transaction tax than any of the following potential tax changes: increasing corporation tax; making the 50% UK income tax permanent; making the bank levy permanent; increasing capital gains tax; or increasing stamp duty on shares.

UK regulators are perceived to have a better understanding of financial markets than EU regulators

Only 22% of respondents agreed that the EU institutions have a better understanding of how financial markets operate than the UK’s FSA, while 62% disagree. 68% agree that EU regulation tends to be designed to concentrate more powers with politicians and officials in Brussels regardless of whether it raises compliance costs for firms in London. Just 19% disagree.

But the EU market remains important

The majority of financial services firms polled see the EU market as the most important to their business. 62% of respondents say that the EU market is the most important to their firm, 26% said the USA market is most important and 12% that the rest of the world is the most important. However, on average, financial services managers say that 27% of their firm’s income is generated through business with companies based in the EU (excluding UK-based companies). Only 15% say that more than half of their income is generated through business with companies based in the EU.

NOTES FOR EDITORS

1) For more information, please contact the office on 0044 (0)207 197 2333, Mats Persson on 0044 (0)779 946 0691 or Stephen Booth on 0044 (0)788 162 5889 or Chris Howarth on 0044 (0)796 041 7148.

2) Open Europe is an independent think-tank calling for reform of the European Union. Its supporters include: Lord Leach of Fairford, Director, Jardine Matheson Holdings Ltd; Peter Cruddas, CMC Markets Plc; Lord Wolfson, Chief Executive, Next Plc; Hugh Sloane, Co-Founder and Chief Executive, Sloane Robinson; Sir Stuart Rose, former Chairman, Marks and Spencer Plc; Jeremy Hosking, Director, Marathon Asset Management; Sir Henry Keswick, Chairman, Jardine Matheson Holdings Ltd; Sir Martin Jacomb, former Chairman, Prudential Plc; Lord Sainsbury of Preston Candover KG, Life President, J Sainsbury Plc.

For a full list, please click here: http://www.openeurope.org.uk/Page/Supporters/en/LIVE

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