The Treasury is to begin the process of putting together contingency plans to support the City should the UK exit the European Union next year without new terms governing trade in financial services.
HM Treasury, however, has told financial services firms that they don’t need to take any action in the event that no deal is reached with the EU over Brexit.
In a paper, the Treasury says it does “not anticipate [a no-deal scenario] arising”, despite international trade secretary Liam Fox recently stating that a no-deal Brexit is now the most likely outcome.
The Treasury said that it will “prepare for this unlikely eventuality… to ensure that the UK continues to have a functioning financial services regulatory regime in all scenarios”.
The paper confirmed that the government will legislate to give regulators powers to phase in any transitional measures, such as “onshoring” financial services legislation.
This, it said, means that firms “do not need to prepare now to implement onshoring changes in the event no deal is reached with the EU” and should continue to plan on the assumption that an implementation period will be in place from 29 March 2019.
“The government will ensure a workable legal regime . . . whatever the outcome of negotiations,” it noted. This would mean handing additional rule making powers previously held by EU bodies to UK regulators and establishing a licensing regime to allow European companies to continue to operate.
It is likely to introduce statutory instruments – changes to legislation which do not require parliamentary approval – governing capital markets and prudential regulation in the Autumn.
The Square Mile could see up to 12,000 jobs lost in the short-term aftermath of Brexit with thousands more at stake longer term, the City of London Corporation has warned, as reported by International Investment.