Low Take-Up Of UK Temporary Permissions Regime By EEA Firms With UK Passports?

According to the FCA's figures in August 2016, the end of financial services passporting between the EEA and the UK was going to leave 5,476 UK finance firms potentially needing a new passporting 'hub' in one of the remaining 27 EU countries and 8,008 EEA firms potentially needing a UK base to cover their UK offerings. So, how many have acted?

There has definitely been a scramble by UK firms to set up in the EU27, although the figures are spread across multiple registers, and regulators do not disclose the numbers of applications that are still in progress. The Central Bank of Ireland claimed "well over 100" in September 2019, for example, with similar numbers thrown out by others. 

Not all firms might use their passports, of course. It's quite straightforward to take advantage of the passporting regime - a simple notification to your home state regulator, which then notifies the various host state regulators. And there's no obligation to actually use a passport. Many firms will have ticked the box for all EEA countries to avoid inadvertently committing an offence wherever their customers happened to reside. And the picture is perhaps distorted by non-EEA corporations who were using the UK as their passport hub, so their new Irish subsidiary would not count as an application by a UK parent.

There has been less pressure on EEA firms who operate under passports in the UK because the FCA offered a Temporary Permissions Regime (TPR) that allows them to continue trading for 3 years as if they were passporting. The registration deadline has been extended each time Brexit has been delayed, so the current deadline is 30 January 2020. However, it's likely that most, if not all, EEA firms that were intending to use the TPR option will have already registered, although some newly authorised firms could still squeeze in (e.g. new FinTech firms).

At any rate, the Financial Conduct Authority has responded to a Freedom of Information Act request with the news that 1,441 EEA-based firms had applied for the TPR by October 2019. Of those, 228 are based in Ireland, 170 in France, 165 in Cyprus and 149 in Germany. 

If this is to be considered a high take-up of the TPR option, then it would appear that only about 18% of EEA passports into the UK were actually being used. That's perhaps not unreasonable, given the tick-box approach to passporting to avoid inadvertently committing an offence in the UK in the event that they ended up with UK customers.

In any event, these 1,441 firms now have until 30 January 2023 to decide whether to set up offices in the UK and get authorised locally, to the extent they continue to serve the UK market.