A major City lobby group has today sent a warning to Prime Minister Theresa May that it is “crunch time” for a transitional Brexit deal for financial services.
Some firms in the sector have already started moving elements of their operations from the UK, according to TheCityUK, which is demanding “urgent clarity on transitional arrangements”.
Ahead of May’s hotly anticipated speech to EU leaders in Florence tomorrow, TheCityUK’s chief executive, Miles Celic, has bemoaned the fact “little progress” has been made by the government in securing a transitional deal.
“For our industry, this really is crunch time,” he said. “We need the UK and the EU27 to agree a time-limited and legally-binding transition period that resembles the status quo as closely as possible and applies across all sectors of the economy.”
He added: “Many firms are already moving parts of their operations out of the UK and Europe. When they’ve gone, it's hard to see them coming back.”
TheCityUK warning comes as the Square Mile awaits a major report from the International Regulatory Strategy Group (IRSG), set to be published in Brussels next Tuesday, on what a financial services deal should look like.
Anthony Belchambers of the Legatum Financial Services Forum described securing a transitional deal as “critical”, adding that City firms need clarity on this “very soon”.
He told City A.M.: “If you talk to most major institutions… they’ll probably kick in the move agenda by the end of the year. So I would have thought that we ought to have an agreement on a transitional deal certainly by the end of the year.”
Elsewhere, Valdis Dombrovskis, European Commission vice president in charge of financial services, yesterday reiterated the Brussels view that UK financial services firms will lose EU passporting rights if Britain leaves the Single Market. He told a press conference: “Participation in the Single Market is a pre-condition for keeping EU passports.”
With this stance in mind, City bodies are now chasing a “bespoke deal” rather than maintaining the current passport system. TheCityUK, for instance, is seeking a deal with “mutual market access based on mutual recognition and regulatory cooperation”.
Stephen Booth, director of policy and research at Open Europe, said: “Broadly speaking, the full range of passporting rights are only available to members of the single market. But there are a range of ways the UK might participate in the single market post-Brexit.”
A government spokesperson said:
We have been clear that we believe a time-limited, implementation period is in the interests of both the UK and the EU and that negotiations on the future partnership should begin as soon as possible.
We have intensified our engagement with the business community to ensure their voice is heard and reflected throughout our negotiations giving them as much certainty as possible as we move through the exit process.
Read more: Hammond vows to keep City top of the world