THE UK FINANCIAL SECTOR AMID GEOECONOMIC DIVIDE: POST-BREXIT CHALLENGES

Abstract

The article examines the impact of global financial fragmentation on the economy of the United Kingdom in the context of the country's withdrawal from the European Union and intensifying geopolitical tensions. The transformation of the global financial system under the influence of trade restrictions, sanctions regimes, and reconfiguration of international economic relations is considered. It is noted that the loss of the passporting regime for financial services has caused a massive relocation of banking assets and jobs to leading European financial centres, including Paris, Frankfurt, Dublin, and Amsterdam. Key risks to financial stability associated with cyber threats, market volatility, and uncertainty in trade policies of the world's leading economies have been identified. The specific features of the impact of geopolitical shocks on the banking sector through increased credit, market, operational, and liquidity risks have been highlighted. The consequences of diverging regulatory approaches between the United Kingdom and the European Union in the areas of asset management, derivatives clearing, capital markets, and investor disclosure have been thoroughly analysed. The relationship between deglobalisation processes and the growth of protectionist tendencies, manifested through onshoring, reshoring, and increased use of national security exceptions, has been comprehensively investigated. The mechanisms of fragmentation's impact on inflationary processes, efficiency of international trade, and flows of foreign direct investment have been revealed. The transformation of business models of financial companies from global integrators to jurisdictional separators under conditions of growing regulatory uncertainty has been characterised. Special attention has been paid to the role of Russia's invasion of Ukraine as a catalyst for accelerating fragmentation processes in the global economy. It is concluded that financial institutions need to adapt to new operating conditions through strengthening international cooperation, investing in innovative potential, and building resilient financial infrastructure to maintain the United Kingdom's competitive position at the global level and ensure long-term macroeconomic stability. The prospects for the development of London as a leading international financial centre in the new geopolitical realities have been outlined.