City calls for transition period to avoid Brexit with a bump

Hayley Kirton
Follow Hayley
The Conservative Party Conference 2016 - Day One
Theresa May has laid out the timetable for leaving the EU (Source: Getty)

The City is calling on the government to avoid a potentially destabilising sharp Brexit by building a transition period into Article 50 negotiations allowing the UK to retain key rights for longer than it otherwise would.

The call comes after the Prime Minister revealed today that Article 50, the official process by which the UK will leave the EU, will be triggered before the end of March 2017.

Triggering Article 50 will start the clock ticking on a two-year negotiation period with the other EU member states on the terms of Brexit, covering issues such as freedom of movement.

While the business community has welcomed the clarity of the newly-revealed timetable, many have also warned they will need a transition period, or face disruption.

A period of transition would see key laws, such as access to markets for financial services firms, phased out rather than being stopped suddenly when the UK leaves the EU.

Read more: These two European politicians say UK can keep Single Market membership

"The terms of the final deal matter more than when negotiations kick off," said Allie Renison, head of Europe and trade policy at the Institute of Directors. "However I think transitional provisions will matter as much, if not more, than the final content and term. It comes back to business wanting to be able to have a sufficient period of time between knowing what the changes will or are likely to be and when they take effect to be able to adjust and prepare ahead of time."

Renison added the government must be careful during the Brexit negotiations that "big events don't happen in a way that pulls the rug from under [businesses'] feet, so that the trigger isn't pulled without warning and we get a repeat of 24 June when the exchange rate took a hit and markets reverberated as a result".

Read more: Passporting tops the Brexit wishlist for financial services firms

Carolyn Fairbairn, director general of the Confederation of British Industry, explained: "A two-year period to find agreement is a very tight timeframe given the complexity involved. It's standard for a transitionary period to apply to major changes in regulation so that businesses have time to adapt and to operate uninterrupted under the existing rules until changes can be implemented."

Miles Celic, chief executive of TheCityUK, remarked: "What firms in the financial and related professional services industry will want to see as early as possible is an agreed and secured transitional period to help ensure financial stability and minimise disruption to their ability to provide products and services to customers."

"With Article 50 now due to be triggered in the coming months, it is important to consider the impact this will have on business and whether transitional arrangements may be helpful to mitigate any negative consequences," said Simon Lewis, chief executive of the Association for Financial Markets in Europe.

Read more: No delays on Brexit, warns Theresa May

May has also revealed her plans for the Great Repeal Bill, which will see EU legislation being transposed into domestic legislation, ready for when the Article 50 clock runs down. This would give the UK the opportunity to pick and choose which pieces of EU law it would like to keep later down the line.

Anthony Belchambers, chairman of the Honorary Advisory Council of the Financial Services Negotiation Forum, noted that, as the UK would be equivalent with the EU at the time Brexit happens, it would put government on strong grounds for negotiating transitional periods where needed.

"We have the slightly absurd situation of when the Article 50 notification is triggered, the firms will then have to start actively thinking what they do without knowing the outcome of the negotiations...so we need to think about that very carefully so we give the firms some clarity," Belchambers said in favour of implementing transitional periods.

Read more: LinkedIn warns of Brexit talent block

Meanwhile, Adam Marshall, acting director general of the British Chambers of Commerce, welcomed the move as adding clarity for the business community.

"A stable regulatory framework – not immediate disruption and change – is important at a time of transition and business uncertainty," Marshall said.

Related articles