The City has ratcheted up the pressure on the Government by issuing a series of demands that banks and other financial firms want from a Brexit deal with Brussels, including a transition period to stop markets from falling into a tailspin.
An influential lobby group chaired by veteran banker John McFarlane, the chairman of Barclays, has published a list of what it calls “key priorities” for ministers to consider in looming negotiations with the EU over the UK’s future relationship with Europe. The list from TheCityUK includes calls to “maximise access to EU markets”, a two-stage transition arrangement, and a plea to allow the clearing of euro-denominated derivatives – a £470bn-a-day industry- to stay in the UK. “There is no question that getting Brexit right is a once-in-a-generation challenge,” said Miles Celic, TheCityUK’s chief executive. “Ultimately, the best Brexit deal will be one that reduces uncertainty and enables businesses to continue to best serve customers and clients.”
Under Article 50 of the Treaty of Lisbon, which Prime Minister Theresa May plans to trigger by the end of March, London has just two years to thrash out a deal with Brussels. Banks, asset managers, and insurers are concerned that once the two years is up, firms and markets will fall off a “cliff edge” because either financial regulations will have abruptly changed or the new rules will have not been decided. To avert the potential chaos, the CityUK wants an agreement on a staged transition to be struck at the start of Article 50. This would involve an initial “bridging period” spanning the UK’s exit to the ratification of the country’s deal with the EU, and then an “adaption period” that would allow companies to adjust to the new rules.
There are fears London’s status as a global financial hub will be damaged by the UK’s secession from Europe, especially in the event of a so-called “hard Brexit” that would result in the country leaving the EU’s single market. Some international banks that have based their European operations in London are already considering shifting thousands of jobs to Paris, Dublin, Frankfurt and elsewhere in the EU to preserve their access to the single market. But TheCityUK said that companies should “have access to the widest possible range of financial and related professional products and services without the need to establish a commercial presence” in both Britain and the EU. It is also pushing for rules that would not restrict UK-based firms from continuing to hire talented EU nationals.
The Government has so far been tight-lipped about the type of deal it will seek and the uncertainty has caused considerable unease in the Square Mile and Canary Wharf. Earlier this week, Douglas Flint, the chairman of HSBC, and Xavier Rolet, the chief executive of the London Stock Exchange, warned MPs on the Commons Treasury Select Committee that some firms will start to implement Brexit contingency plans as soon as Article 50 is activated, if the Government has not given companies any guidance on what it plans to negotiate with Brussels. Mr Rolet estimated that as many as 232,000 British jobs could be at risk if the clearing industry is lost to Europe or New York, much higher than the tens of thousands of job losses that many thought Brexit might entail. HSBC itself has previously warned it could shift 1,000 roles to Paris.