No deal? What it could mean for financial services

Published: 30 September 2019

The possibility of the UK heading for a ‘no-deal’ exit from the EU has intensified the spotlight on the financial services industry’s state of readiness in recent weeks.

No-deal remains only one possible outcome for Brexit, and one which the UK parliament has made clear it wants the government to avoid. But what if we do end up there?

Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA), has warned that, while it had worked with the Bank of England to prepare for all possible scenarios, it couldn’t guarantee there would be no disruption in the financial services world.1

The problem is that while leaving with some form of trade agreement would trigger the start of a transition period, exiting without one would spell the immediate end of all existing EU and UK arrangements. The UK would instead revert to World Trade Organisation rules when dealing with the 27 remaining EU nations.

The implications for financial services could be very wide-ranging. For example, the government’s so-called ‘Operation Yellowhammer’ documents, released in early September, point to the likelihood of disruption to cross-border UK financial services, to the flow of personal data to and from the EU and delays to certain insurance payments from UK insurers into the EU.2

The exact ramifications would only become clear at the time. But in the meantime, you can find the latest government information about what to expect around a deal or no-deal Brexit at and here’s our quick guide to some of the financial services areas to watch and how they could impact you."

The potential impacts of a no-deal Brexit:

An end to the EU wide ‘passporting’ regime

The ‘passporting’ regime allows financial services providers authorised in any state in the European Economic Area (EEA) to trade freely in any other EEA state with minimal additional authorisation - but it would end with a no-deal Brexit.

Some steps have been taken to ease the switch so that services – at least to UK customers from passported in firms - shouldn’t just stop. For example, an ‘onshoring’ process that converts directly applicable EU law into UK law would come into force on the day the UK leaves the EU. In addition, the FCA has established a Temporary Permissions Regime (TPR) that reduces disruption for EEA organisations by allowing them to continue their regulated activities in the UK for up to three years while working towards getting the appropriate regulatory permissions.3

But UK-based firms will not be able to continue operating as they currently do when selling services to customers across the EEA - and given the UK is the biggest exporter of financial services inside the single market - that could have serious ramifications.4

If you’re a UK-based customer of an EEA financial services firm, your service should be covered by the TPR, with providers required to let you know if anything changes. To find out where a provider is based you can check the FCA Register.

UK citizens based in the EEA may be more directly affected, depending on the products they have and who provides them (i.e. some firms may no longer be allowed to operate in certain parts of the EEA after a no-deal Brexit). If you’re concerned about this, contact your provider to find out more. The FCA also has information on its website on how Brexit could affect you.

Challenges for insurance services to EEA customers

One specific impact of the loss of passporting is that UK insurers providing insurance services to EEA based customers may be unable to pay out certain claims (including on policies underwritten pre-Brexit), as they must be authorised in an EEA country to sell contracts to EEA customers, continue paying claims and take premiums on existing contracts.

In other words, in the event of no deal a UK firm paying a claim to an EEA citizen/resident, and an EEA citizen/resident paying premiums to a UK firm could become illegal. The Association of British Insurers has said insurers could be “left in an impossible position and face an unacceptable choice: break their promise to customers or risk breaking the law”.5

While some countries have introduced mechanisms to continue paying claims on existing policies wherever the policyholder is located, others could still require insurers to set up base in their own member state in order for them to carry on paying contracts.6

Possible impacts on pension payments

UK retirees living in EEA countries will retain their entitlement to their State Pension in the event of a no-deal Brexit, but there is a chance that they will miss out on future annual increases to the payment. The government has said that it would continue paying the annual increases for the first three years after a no-deal exit, but it will not provide any guarantees after that.

That raises the prospect of retired expats in the EEA having their UK pension payments frozen in the same way as those who retire to countries such as Australia, Canada or New Zealand.7

There is also a concern that insurers authorised in the UK may be prohibited post-Brexit from paying annuities to some members living in the EEA. While firms are exploring the issue and some EEA countries will likely introduce legislation to allow payments to be made there is an ongoing lack of consistency in how the issue is being treated.8

Protection if you’re driving in the EEA

UK driving licences will no longer automatically be valid in the EEA in the event of a no-deal Brexit. Drivers will have to obtain an International Driving Permit (IDP) if they intend to drive in the EEA. These can be bought from selected Post Offices for £5.50 each.

Drivers of UK registered vehicles may well also need to carry a motor insurance Green Card when driving in the EEA, to show that they have the necessary minimum motor insurance cover for driving in the country being travelled to. This can be obtained from insurance providers and should be ordered as far in advance of the trip as possible.9

How it affects your investments

Investment values can be influenced by a range of direct and indirect economic, financial, geo-political and company-specific factors, of which Brexit is just one.

Brexit – with or without a deal - does not change the fundamental principles of successful long-term investing. In other words, to be patient and stick to the golden rule - diversify your investments. Spreading your holdings across different asset classes, sectors and regions - and reviewing them to ensure they stay in line with your risk appetite and objectives - will continue to help manage your investment risks while still giving you the ability to take advantage of opportunities that may arise.

Learn more

These are just some of the current talking points around financial services in the event of a no-deal Brexit. If you want to research further and keep an eye on official information covering a deal or no-deal scenario, you may find it helpful to visit and take the government’s ‘get ready for Brexit’ check at

Important information

This is provided for general information only and takes no account of personal circumstances. It is not a recommendation to buy or sell. It is provided solely to support you in making your own investment decisions. If you have any doubts as to their suitability you should seek expert advice. Alliance Trust Savings does not give financial or investment advice.

Please be aware that the value of investments can fall as well as rise so you could get back less than you invest.

Laws and tax rules may change in the future without notice. This information takes no account of your personal circumstances which may have an impact on tax treatment.

1 City AM - Issues with no-deal Brexit preparations ‘still to be resolved’, warns City watchdog - 16 September 2019
2 FT - Yellowhammer document sets out potential damage of no-deal Brexit - 11 September 2019
3 DLA Piper - UK: No-Deal Brexit: Impact On Financial Markets - 13 Sept 2019
4 BBA - What is ‘passporting’ and why does it matter? - December 2016
5 Guardian - British expats face 'cliff edge' in pensions and insurance after Brexit - 18 September 2017
6 Insurance business UK - FCA’s Andrew Bailey on ‘the risk that remains’ for insurance policyholders - 17 September 2019
7 FT - Expats warned of ‘frozen’ pensions under no-deal Brexit - 1 Sept 2019
8 HOC - Exiting the European Union Committee Oral evidence: The progress of the UK's negotiations on EU withdrawal, HC 372 - 24 July 2018 - Q2317
9 ABI - Travelling to the EU in the case of a No-Deal Brexit - n/a


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