The Impacts of Brexit on UK Offshore Financial Hubs

ICO Services
Nov 7 · 4 min read

In 2016, 51.9% of people across the United Kingdom voted on a referendum to withdraw from the European Union. There were a number of pros and cons across the board, but financial concerns were definitely on both sides.

Mostly, people voted ‘yes’ on Brexit because they wanted to see savings that could equate to billions of dollars per year, as well as more control over their own government, more control over immigration, and more security in the United Kingdom.

Before Brexit, people working in the EU could more easily travel through the United Kingdom, but a majority of residents of the UK felt this was a threat to their security. When the United Kingdom was no longer a member of the European Union, the worry of immigrants flocking in with few restrictions would be a thing of the past.

Not to mention that people felt their government was too much geared towards big business, so it seemed that Brexit was an excellent idea.

Brexit Disrupts UK’s Financial Sector

Back to the financial side of Brexit. The financial sector is one of the biggest contributor’s to British economy, accounting for 12% of the United Kingdom’s GDP. Before Brexit, banks and other financial firms in the UK could simply sell their services and products across countries included in the European Union. This is no longer the case since Brexit is in the picture.

The second major issue that the UK’s financial sector is currently facing since Brexit comes in the form of regulation. The UK was a part of the EU for 40+ years, and now, all of those deals are off the table. That means that the UK is going to need to renegotiate all of those deals that have been benefiting their financial sector.

Another major issue? Offshore banking. For years, the UK has had a number of offshore financial hubs that are being impacted by Brexit. Likewise, there are financial hubs waiting to claim those companies and high net worth individuals who are ready to get away from the UK.

Fragmentation Issues

Brexit absolutely changes the financial sector of the United Kingdom where offshore banking is concerned. Of course, jobs are already leaving London. ON the other hand, many corporate headquarters are moving to mainland Europe. Many people are speculating as to what all of this will really mean for offshore banking, whether from the perspective of the United Kingdom or the rest of the world.

The most likely circumstance that will arise out of Brexit is a whole new level of fragmentation in the offshore banking sector. London will still be a major hub in the realm of offshore banking around the world, but things won’t be the same. Other European centers will continue to grow, and a few of them will likely grow bigger and faster than it was anticipated before Brexit. While this spells good things for on the rise offshore jurisdictions, it doesn’t necessarily bode well for offshore hubs in the United Kingdom.

Other Offshore Jurisdictions Impacted by Brexit

Not only is mainland Europe seeing the impacts of Brexit in the offshore banking sector, but the Crown Dependencies (Isle of Man, Jersey, and Guernsey) and British overseas territories (Cayman Islands, BVI, Falkland Islands, Gibraltar, and Bermuda) are gearing up for the impact. They are currently working on precautions to protect assets as companies and high net worth individuals withdraw their business.

Many people have speculated that Cyprus could benefit greatly from Brexit. While it’s true that companies will likely come to Cyprus as they leave the UK after Brexit, the truth is that a good chunk of their population includes UK nationals that will quite likely be returning home or making other plans. This could have a negative impact on the economy in Cyprus.

Swiss banks have noted an influx of new British clients, and many of these clients include high net worth individuals. While Swiss banks don’t release private data, they’ve let the world know they are opening their doors to anyone seeking to leave the UK’s financial sector.

Perhaps the offshore jurisdiction that has the most to gain from Brexit is Luxembourg. They have an excellent tax rate and have been an on the rise offshore jurisdiction for years. They are adept at making offshore banking easy, and this works well for corporations and high net worth individuals looking to leave the UK’s financial sector.

Takeaway

While the true economic results of Brexit haven’t been seen yet, it’s easy to see why offshore banking is being so heavily impacted right now. As things settle out, we’ll see United Kingdom financial sectors such as London continue to thrive, but other European offshore jurisdictions will grow faster after Brexit.

ICO Services

Written by

ICO SERVICES is specialized in the formation of Offshore Companies and Offshore Banking. https://www.icoservices.com (Author: Enzo de Vicentes)

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade