UK: Brexit: What Next For UK Based Employers In The Financial Services Sector?

Last Updated: 13 July 2016
Article by Nick Elwell-Sutton, Mark Howard and Tim Richards
Most Read Contributor in UK, September 2017

For now, employment rights and obligations will continue to be subject to EU law in the same way as before the referendum. So, for employment law nothing is likely to change until the UK exits the EU, or the terms of our changed relationship are known. The extent to which the UK may be able to change employment laws could well depend on these terms. Of more immediate concern to the financial services sector is the uncertainty of knowing what lies ahead: the Rumsfeld "unknown, unknowns".

Of particular concern is the issue of whether passporting rights (that is the system that allows financial services businesses regulated in the UK to operate freely across the EU) are included in any exit deal. The loss of these rights would mean inevitable redundancies as firms are likely to move some of their activities to other EU financial centres such as Dublin, Frankfurt or Paris and seek regulatory approval there to ensure continued unfettered access to EU markets.

Set against this, the City is the largest global financial centre and the heart of Eurozone's financial system. It is uniquely positioned as a hub between Europe, Asia and the U.S. and the City's key attractions will largely remain: political stability; cosmopolitan atmosphere; social and cultural activities; English language; lack of corruption; benign business environment; moderate workers' rights and the predictability and integrity of its legal system. This will continue to pull in skilled workers from all over the world and make London a place that people will inevitably want to live and work in and so continue to provide a talented pool of workers for business.

We do not know at this stage what future immigration controls will look like but since immigration has been one of the prime issues in the Brexit campaign, it is likely to feature highly in any negotiations for a trade deal. Because of the City's global status, thousands of EU and non-EU citizens are employed in it and many of those will be key staff. For existing EU national employees in the UK, the current position is they still have a right to work but it remains to be seen whether any transitional provisions are put in place and whether, once the UK's EU membership is formally terminated, they will become subject to UK immigration control.

Employers should now audit their staff to see the extent of EU nationals working in the UK and whether they could, for example, apply for Permanent Residence in the UK. If UK nationals are operating in other EU member states, thought could also be given to whether they would require permission to work in the future if reciprocal restrictions on UK nationals are implemented. Advice should be sought as soon as possible on what action can be taken now to protect key staff identified.

Sovereignty was another important issue in the Brexit campaign. So, would leaving the EU allow the UK to rescind some of the regulations it considers damaging to its competitiveness? The new rules limiting bankers' bonuses to twice their salaries might be a prime target, for example. But any real freedom to cut such regulation might be limited. Outside the EU, the UK would be treated as a "third country". So, like Switzerland, it might be required to ensure its regulations are seen "as equivalent" by the EU in order to maintain access to the EU financial markets.

Likewise, in order to obtain a free trade agreement, the UK may be forced to accept EU social and employment regulation. Members of the European Economic Area (EEA), such as Norway, are bound by most of EU employment law even though they are not part of the EU decision making process. Switzerland has negotiated a number of agreements with the EU and is in a similar position.

But let's assume for now, the UK manages to negotiate an exit which doesn't bind it to EU social and employment rules. Which parts of UK employment law are at potential risk of change? EU law has provided UK workers with a safety net which has prevented the UK government and the UK courts from reducing workers' rights below a minimum core level. Leaving the EU will mean that the UK government is free to remove and alter those rights. Any change will depend on the political will at the time, but top of the list might be how holiday pay is calculated, how holiday pay accrues during periods of sick leave, agency worker rights, capping discrimination awards and the current restriction on harmonising terms and conditions of employment after a TUPE transfer. Employment laws which are purely UK derived will be unaffected. These include redundancy pay, some unfair dismissal rights and national minimum wage.

Financial institutions with operations in Scotland face a period of greater uncertainty because of the risk of a second referendum for Scottish independence. Should Scotland break away from the UK and be successful in its application to get into the EU (neither of which is a foregone conclusion), there could be a gradual divergence of Scottish and UK employment rights. Under the current plans for Scottish devolvement, the newly passed Scotland Act devolves power over the operation and management of employment tribunals to the Scottish Parliament allowing it to exercise powers relating to rules of procedure, membership, administration and funding of tribunals – including the abolition of tribunal fees. Other than this, there has been no intention, so far, to give Scottish Parliament independent powers to change employment laws.

Many financial sector employees continue to have legacy defined benefit pension schemes. The referendum result has led to volatility in the investment markets and the fall in gilt yields which has the impact of increasing the value of pension scheme liabilities and therefore deficits. This may be compounded by trustees concerns over the weakening of the "employer covenant" supporting the scheme as a result of the referendum, with the consequence that trustees may become more cautious in the assumptions they use – increasing the value of liabilities furthers.

Longer term the impact on pensions would depend on the form Brexit takes. The UK successfully campaigned against stronger funding requirements in the latest EU Directive on Institutions for Occupational Retirement Provision (which has yet to complete is legislative process). If the UK remains in EEA it may find that future directives will impose stricter funding requirements. 

Finally, upon leaving the EU, there could follow a period of uncertainty as to what the law on certain issues actually is. Holiday pay is a good example of this. Recently the European Court of Justice ruled in Lock v British Gas, that commission must be taken into account when calculating holiday pay. Following this, the UK Employment Appeal Tribunal ruled earlier this year that the UK regulations must be read as though they actually provide for this . This ruling now forms part of UK law which employers must abide by. But what is the status of its ruling after a UK exit? Could an employment tribunal simply ignore it, and simply interpret the UK regulations as they stand? The point may become clearer when we understand more about how the European Communities Act 1972 is to be repealed.
Of course, if Brexit negotiations culminate in a deal with the EU, it is possible that the UK courts would continue to see ECJ decisions (both past and future) as persuasive and perhaps even binding if the UK ends up with a Norwegian model trade and social deal.

Brexit: What Next For UK Based Employers In The Financial Services Sector?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nick Elwell-Sutton
Mark Howard
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.