A decade after the referendum, what the City’s resilience and UK–EU regulatory divergence mean for FCA-regulated firms.
The City of London 10 years on: resilience, relocation and market share
On 23 June 2016, the UK voted by 52% to 48% to leave the European Union. A decade later, the predicted exodus from the City has not materialised, but neither has the deregulated “Singapore-on-Thames” boom that some campaigners promised. The reality sits between the two, and for compliance teams it is rather more nuanced than either headline suggests.
Research by New Financial identified more than 440 financial services firms that shifted part of their business, staff or legal entities to the EU, moving over £900bn in bank assets and more than £100bn in funds and assets from insurers and asset managers.[1] The City of London Corporation estimates that roughly 40,000 finance jobs ultimately moved to European hubs, well below the numbers once forecast. Dublin and Luxembourg absorbed the bulk of asset-management activity, Frankfurt took banking, and Paris drew the broadest mix of functions.[2]
Despite this, London held its position as Europe’s dominant financial centre. Britain remains second only to the United States as a destination for international capital, hosting more than £12 trillion in foreign direct investment, portfolio investment and cross-border deposits at the end of 2025.[3] The damage, as New Financial’s founder characterised it, was more like the UK breaking its own arm than suffering a fatal blow, painful and partly self-inflicted, but survivable.
The market-share picture is less flattering. Since 2015 the UK has lost ground in 10 of 12 categories of international finance, including foreign-exchange trading, share offerings and assets under management. The EU however, failed to capitalise fully, its long-running plan to unify fragmented national capital markets remains unfinished, so London has not lost as much as it might have. Both centres, meanwhile, have ceded ground to fast-growing Asian markets.
For asset managers specifically, the investment story is mixed. A Citywire analysis published to mark the anniversary found that broad index averages favoured Continental European equities over the decade, yet fund-level data tells a subtler tale, with London’s cyclical value managers staging a notable comeback in recent years.[4]
The Office for Budget Responsibility maintains that Brexit will reduce long-run productivity by around 4% and goods trade by roughly 15% lower than it would otherwise have been.[5] Sterling has spent most of the decade about 10% below its June 2016 level[6], and UK GDP per capita has drifted several index points behind the EU27.[7] None of this lands evenly: large firms absorbed the new costs, while smaller regulated firms, the asset managers, brokers and advisers who make up much of the FCA-regulated population, felt the administrative drag most acutely, which has not abated.
UK vs EU regulatory divergence after Brexit. What changed
For compliance officers, the most consequential change is not where firms are domiciled but whose rulebook they answer to. While the UK was an EU member, thousands of European regulations applied automatically. Brexit ended that, and the Financial Services and Markets Act 2023 (FSMA 2023) set in motion the phased repeal of retained EU law, handing the FCA and PRA the power to write the detailed rules themselves. This under a domestic framework, with a new secondary objective to advance the UK’s international competitiveness.[8]
The Institute for Government’s ten-year assessment concludes that the UK’s freedom to set its own rules created genuine opportunity, particularly in fintech, but EU-derived law were repeatedly slowed by business concerns about uncertainty and the cost of meeting two regimes at once.[9] Several flagship divergence projects, from data protection to product conformity, were quietly shelved precisely because divergence adds friction to EU trade.[10]
Where divergence has bitten, was most felted by asset managers and brokers. The clearest example is investment research. Under MiFID II’s unbundling rules, inherited from the EU, managers had to pay for research separately from execution, a regime that smaller UK firms found cut their access to global research. Following the 2023 Investment Research Review, the FCA reinstated the option to bundle research and execution payments, deliberately realigning the UK with the United States rather than the EU.[11] For a UK manager that also markets into Europe, that is a genuine two rulebooks problem.
Other live deviations include reform of the SMCR regime (Senior Managers & Certification), changes to the Short Selling Regulation, the new consolidated tape, and retail disclosure rules replacing the EU’s PRIIPs regime, alongside an overhauled UK financial promotions framework. The EU, for its part, has continued to build out its own architecture, the EU AI Act, DORA for operational resilience, and a consolidated AML package now overseen by the new EU anti-money-laundering authority, AMLA.
Notwithstanding the.. easy route into EU markets has closed. The automatic right that once let a UK-authorised firm sell its services right across the EU ended with Brexit, and the equivalence arrangements meant to replace it (the EU formally recognising UK rules as good enough to grant access) were never granted in any broad or lasting way. Firms serving both markets now run parallel obligations. Change today remains modest, but it is cumulative, every FCA consultation that adjusts a rule the EU has left untouched widens the gap a little further. The practical upshot is that horizon-scanning is no longer a single-jurisdiction exercise, the rulebook you monitor depends on where your clients and funds sit, and the answer is increasingly both. This makes compliance more difficult, adding to the burden.
What Brexit at 10 years means for your compliance function
More rulebooks, more change, and more of it landing on small teams. The UK now generates its own steady stream of FCA and PRA rule changes as retained EU law is replaced. The volume and pace of regulatory change has risen, not fallen.
This has three practical consequences for regulated firms:
1. Dual-track horizon scanning: A UK firm with EU clients, funds domiciled in Dublin or Luxembourg, or staff in an EU branch cannot assume the two regimes move together. Conflicts of interest, personal account dealing, financial promotions, AML and KYC standards can and do diverge, and someone has to own the difference.
2. The administrative burden has grown fastest for the firms least able to carry it: The evidence is consistent that larger firms absorbed Brexit’s compliance costs more easily; smaller FCA-regulated firms, where a single Compliance Officer, Head of Compliance or MLRO often carries the whole remit, sometimes alongside a COO role, felt it most. Spreadsheets, email chains and disconnected point-tools do not scale to a world of continuous, multi-jurisdiction change.
3. Evidence and audit trails matter more in a divergent environment: When your obligations differ by jurisdiction and shift more frequently, being able to show what you did, when and why, to the FCA, to clients, or to an EU regulator, becomes a competitive asset as well as a defensive one.
How Leo Can Help
These consequences and the gap that creates is precisely the gap that RegTech exists to close. Is turning a rising, fragmenting compliance workload into something a small or large team can manage more efficiently, with consistency and a defensible record.
This is a problem Leo was built to solve. Leo is a RegTech Compliance Management platform that brings a regulated firm’s day-to-day compliance into one place, personal account dealing, employee attestations, conflicts of interest, gifts and inducements, financial promotions review, AML and KYC onboarding, compliance monitoring and training, replacing the spreadsheets and paper forms many firms still rely on.
Our regulatory content is kept current as the rules change, and its AI compliance assistant, Eva, answers regulatory and platform questions with citations, so teams can keep pace with divergence without adding headcount.
Ten years on, the lesson for compliance leaders is straightforward: Brexit did not lighten the load, it multiplied and fragmented it, and the firms coping best are those that stopped treating compliance as a manual, reactive task and started treating it as a system built to absorb constant regulatory change.
At Leo, we have more than 20 years of experience in delivering compliance excellence. We are internationally recognised, featuring in the RegTech 100 list, and have been named “Best Solution of Digital Transformation in Regulatory Compliance” by the European RegTech Insight Awards.
Contact us and see how Leo can help you streamline your compliance framework.
References
[1] https://www.newfinancial.org/reports/brexit-%26-the-city%3A-the-impact-so-far
[2] https://www.business-standard.com/world-news/10-years-after-brexit-vote-how-britain-s-financial-industry-recovered-126062100737_1.html
[3] https://www.business-standard.com/world-news/10-years-after-brexit-vote-how-britain-s-financial-industry-recovered-126062100737_1.html
[4] https://citywire.com/funds-insider/news/10-years-from-brexit-which-equity-funds-did-best-uk-or-europe/a2492579
[5] https://obr.uk/forecasts-in-depth/the-economy-forecast/brexit-analysis/
[6] https://www.cnbc.com/2026/06/23/brexit-10-years-uk-economy-politics-charts.html
[7] https://www.cnbc.com/2026/06/23/brexit-10-years-uk-economy-politics-charts.html
[8] https://www.davispolk.com/insights/client-update/financial-services-and-markets-act-2023-ushers-era-major-regulatory-change
[9] https://www.instituteforgovernment.org.uk/comment/brexit-10-regulation
[10] https://ukandeu.ac.uk/brexit-ten-years-on-regulation/
[11] https://www.skadden.com/insights/publications/2025/05/fca-finalises-rules-providing-fund-managers
