A leading think tank has today called on the government to secure "clear and upfront" transitional arrangements to smooth the path for the City through Brexit.
A new paper, which lays out the financial and professional services sectors priorities for the Brexit negotiations, from lobby group TheCityUK also warns that drawing up the final EU departure deal could take a substantial amount of time.
"Delivering a bespoke deal based on mutual recognition and regulatory cooperation is likely to take several years, which underlines the concomitant need for clear transitional arrangements," the paper read.
In particular, TheCityUK is calling for two distinct transition periods – a bridging stage between the date the UK leaves the EU and the date when a new partnership agreement is ratified to avoid businesses facing a cliff edge situation with their rights, and an adaptation stage beginning on the date the bridging period ends, where firms are given some leeway to adjust their business models to change in the laws.
"There is no question that getting Brexit right is a once in a generation challenge," said Miles Celic, chief executive of TheCityUK. "If there is anywhere in the world which has the necessary knowledge and expertise to get this done, it is here in the world’s leading financial and related professional services hub."
Earlier this week, top City execs, including HSBC group chairman Douglas Flint and London Stock Exchange chief executive Xavier Rolet, told the influential Treasury Select Committee a grandfathering period of three years after the conclusion of the Article 50 process would be crucial to giving businesses time to adapt and to dodge any unintended legal trip-ups resulting from the Brexit deal.
Prime Minister Theresa May indicated to the Confederation of British Industry annual conference back in November that she was cautious of British businesses facing a "cliff edge" on day one of Brexit, while chancellor Philip Hammond told the Treasury Select Committee last month "thoughtful politicians" would see the need for a "longer period to manage the adjustment".
"Firms' nervousness can be allayed only when they know how they can continue running their businesses," said the City of London Corporation’s policy chairman Mark Boleat on the renewed calls for a transition period. "A transitional arrangement – agreed as soon as possible – is the best way to ensure that firms are not forced into implementing expensive contingency plans.”
Anthony Browne, chief executive of the British Bankers' Association, added:
All EU member states have a mutual interest in ensuring that the period between concluding the UK's exit from the EU and any new relationship does not result in disruption to businesses and customers.
Including transitional arrangements in the UK’s withdrawal agreement under Article 50 would avoid a cliff-edge moment and ensure an orderly transition post Brexit.
And, Allie Renison, head of EU and trade policy at Institute of Directors, remarked:
The need for a transitional period, to cover not only any gap between the withdrawal deal and conclusion of a new agreement between the EU, but also for the time until the new deal comes into force, is paramount.
Business will not be given a full running commentary from government throughout negotiations, so having sufficient time to make any adjustments once the text of any new deal is published is essential.
Also among TheCityUK's Brexit wishlist for financial firms is continued access to markets and global talent pools and regulatory and legal consistency, including clarity on how judgments from UK courts could be enforced within the EU.