The City of London will be able to cope with the loss of banks’ passporting rights if Britain leaves the EU’s single market, according to an influential credit rating agency, assuaging fears that the UK’s financial services sector will be crippled by Brexit.

EU passports allow lenders and other financial companies to operate across the 28-nation bloc without having to secure approval for access to each country individually. Opponents of Brexit have argued that losing passporting rights would deal a heavy blow to London’s status as a global financial centre that gives banks around the world access to the EU.

However, in a boost to the City, analysts at Moody’s Investors Service have largely dismissed concerns that London would be unable to withstand the consequences of the UK leaving the single market, arguing the loss of passports would be “manageable” for most banks and financial services firms.

“The direct impact is likely to be modest,” the credit analysts said today. “The greater impact would be felt through higher costs and diversion of management attention, as the companies concerned restructure, reducing profitability for a time.

“This is credit negative but manageable. And other critical factors such as capital and liquidity, which are largely determined by global standards, are unlikely to face material changes due to Brexit per se.”