Financial markets body to probe Brexit risk to EU-27

A leading trade body is launching a probe into the likely impact of the UK's withdrawal from Europe's single market amid concern about the consequences for the continent's biggest corporate names.

Sky News understands that the Association for Financial Markets in Europe (AFME) has commissioned Boston Consulting Group to examine ways to minimise Brexit's repercussions for the companies and economies of the remaining 27 EU member states.

The City is the main financial centre for European, as well as UK, companies, and there are expectations that a fragmentation of wholesale financial products could drive up costs for end-users.

An AFME spokeswoman confirmed that it had asked BCG to conduct the work, saying it would look at how corporates and investors "should respond in order to continue to grow the 'real economy' and create jobs and new investment".

"The focus of the report will be on the use of financial services products, including both wholesale markets and wholesale banking," she said.

The report is expected to finalised by April, by which time Theresa May, the Prime Minister, has pledged to trigger the Article 50 process necessary for the UK to leave the EU.

Many pro-Brexit City figures believe the UK's withdrawal from the single market will have little discernible impact on the financial services sector, or on the users of wholesale banking services, because it will be in the EU-27's interests to strike mutually beneficial arrangements.

Last November, Sky News obtained a report produced by EY, the professional services firm‎, which revealed that companies such as Airbus and Volkswagen (IOB: 0P6N.IL - news) are concerned that the potential fragmentation of UK-based finance could significantly increase their cost of funding.

The EY study‎ included detailed responses from 15 big companies, among them Telefonica (LSE: 826858.L - news) , the owner of O2, and the Italian confectioner Ferrero.

While limited in its scope, the document revealed that most of the companies surveyed "have concerns that a hard Brexit may break a model that is perceived to be working well and adding tangible benefits, especially for capital-raising, borrowing and risk management".

Mrs May will meet the bosses of some of Wall Street's biggest firms for talks about her Brexit strategy later on Thursday.