Financial regulator warns access to EU markets is crucial for healthy competition

Britain needs to retain access to European Union markets and human resources if its financial sector is to remain competitive after Brexit, the Financial Conduct Authority (FCA) said on Tuesday (18 April).

In its annual business plan for the upcoming year, Britain's competition watchdog made dealing with the uncertainties surrounding the Brexit negotiations a priority. The regulator stressed it was important for firms in the financial services sector to being able to recruit a diverse workforce, to ensure they remained competitive and well-run.

"Open markets are an important enabler of healthy competition, supporting FCA objectives," the FCA said in a statement.

The regulator added it did not want Britain to become a "rule taker" to gain access to the single market post-Brexit, but should match the bloc's laws with similar rules.

Andrew Bailey, the FCA chief executive, said in the regulator's contingency plans the risk of having no access to the single market was a very concrete possibility.

"I start from the principle that firms, on the whole, don't want to move operations," he said.

"We ought to set up a system of open markets where firms make these choices, not regulators and governments."

A number of financial sector firms have already drawn up plans to relocate away from London, amid the increasing uncertainty surrounding Britain's post-Brexit future.

Leaving the single market means lenders will not retain access to the European banking passport system, which allows banks and other financial institutions authorised to operate in an EU country, or a state member of the European Economic Area (EEA), to conduct business across the union.

Frankfurt, Amsterdam, Luxembourg and Dublin have all emerged as possible destinations for London-based banks to relocate but analysts have warned it would be nigh on impossible to replicate London's environment abroad, in terms of workforce and infrastructure.

However, while banks might end up remaining in London, the FCA warned that the lingering uncertainty could be extremely damaging.

"This lack of clarity will potentially lead to a period of prolonged uncertainty for markets, firms and consumers," the FCA said.