Open Europe, an independent think tank set up to contribute bold new thinking to the debate about the direction of the EU, commissioned Keith Boyfield Associates to head up a major research study in 2006 on the impact of the Financial Services Action Plan (FSAP) on the City of London. The FSAP is an ambitious programme of legislation, initiated in 1999, which aims to create a single market in financial services within the EU.
Open Europe is chaired by Lord Leach of Fairford, a director of Matheson & Co. Among its many other leading City supporters are John Varley, Group CEO of Barclays plc; Lord Renwick of Clifton, Vice Chairman, Investment Banking, J P Morgan (Europe); Stuart Rose, CEO of Marks & Spencer plc; Michael Spencer, CEO of ICAP plc, and Roddy Fleming, a Director of Fleming Family and Partners.
While the FSAP was launched with laudable aims, in practice, it has been bedevilled by member states seeking to protect certain vested interests and erect or maintain barriers to foreign entrants. The Plan also imposes considerable direct and indirect compliance costs. The research study conducted for Open Europe by Keith Boyfield Associates, based on a detailed questionnaire survey and a wide ranging series of interviews with financial institutions, trade associations, professional advisers and academics, was the first attempt to identify the precise costs generated by the FSAP to the City of London.
Our research findings were published in a report entitled Selling the City Short: A Review of the Financial Services Action Plan, published in November 2006. We concluded that, in practice, the FSAP is likely to impose substantial additional cost burdens on firms operating in London’s financial markets. By 2010, the symbolic deadline for the realization of the Lisbon Agenda, which aims to create a ‘more dynamic, innovative and attractive Europe’, these cumulative costs may reach as much as £23.5 bn. However, the potential benefits to be derived from implementation of the FSAP in its present form are likely to undershoot this figure considerably.
The report was launched at London’s Oriental Mandarin Hotel at an event chaired by Lord Lawson of Blaby, the former Chancellor of the Exchequer. The report attracted extensive media coverage, including a major feature in the Financial Times (‘Single EU trade area threaten City growth’ by John Willman, 4 December 2006) and a headline feature in the Daily Mail’s City & Finance pages (‘£23 bn of EU red tape will strangle London’ by Karl West, 5 December 2006).
The full FSAP package has yet to come into force, but the report recommends that action is required now to arrest spiralling costs. The European Commission is due to review the entire programme later this year. Fortunately, Internal Market Commissioner Charlie McCreevy has promised to repeal any legislation found to be wanting. This report sets out a series of recommendations on what needs to be done.
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