The UK government must act swiftly and decisively to ensure transitional arrangements are in place so banks can avoid the “cliff-edge” scenario, the Association for Financial Markets in Europe (AFME) has warned.
The trade body, which describes itself as “the voice of Europe’s wholesale financial markets”, representing “the leading global and European banks and other significant capital market players”, yesterday published a report claiming that the lack of any clarity on the future relationship between the EU and the UK meant that “market participants are having to take important decisions amid considerable uncertainty”.
“However, additional time is required to adapt to the post-Brexit framework and to minimise disruption for end users of financial services, including ensuring the continuity of existing contracts.”
The body is calling for transitional arrangements that will include a “bridging period” and an “adaptation period”.
The bridging period would be to ensure stability and continuity in the likely event of the UK and EU being unable to achieve and ratify a new trading relationship within two years of Article 50 being triggered, namely by end of March 2109.
This bridging period should last as long as is needed until a new agreement is ratified, said AFME, and similar concerns should apply to any adaptation period for a ratified agreement.
FTSE 100 firms scoff at May’s attempt to enlist their support
Meanwhile, as beleaguered prime minister Theresa May faces uncertainty over the Repeal Bill, which paves the way for Brexit, going to a vote on Monday, FTSE 100 chiefs have blasted a letter that No 10 has asked them to sign that would see the companies lend support to the government’s approach during Brexit negotiations with the EU.
Sources at UK boardrooms expressed “incredulity” that they were being asked to support the government’s position when so many of them are deeply opposed to Brexit, and dismayed at what many perceive as UK Brexit minister David Davis’s ineptitude, said Sky News.
The letter was circulated this week, with a request that business leaders sign to lend their support by the end of this week. It was not clear whether the letter had been written with May’s knowledge or approval.
One business chief said, “There is no way we could sign this given the current state of chaos surrounding the (Brexit) talks.”
The letter contains no comment about the government’s handling of negotiations so far, and is upbeat about prospects of life outside the EU, saying “We welcome the Government’s commitment to negotiating an interim period so that firms can ensure they are ready to adapt to the changing relationships and thrive under the new partnership being created with the EU.”
It contains notes that strike a chord with many of the claims by pro-Brexit Tory MPs that the UK can have a bright trading future outside of the EU by looking to forge trade deals with Commonwealth and other countries.
“As the UK makes progress towards establishing stronger trading links with markets like the US, India, Japan and Mexico,” the letter says, “British businesses who know these markets well should stand ready to use their expertise and networks to cement future relationships.”
Frankfurt ‘won race [to be EU finance base] before it even began’
Meanwhile, Deutsche Bank chief executive John Cryan (pictured left) yesterday reaffirmed his oft-stated conviction that Brexit is an own goal by the UK, with Frankfurt a shoo-in for replacing London as the EU’s key financial centre.
He told a conference in Frankfurt that the competition to Frankfurt would come, not from other EU bases such as Paris or Dublin, but from global trading centres such as New York and Singapore, adding that the race to become the EU’s leading financial centre was “won before it even began” by Frankfurt.
“This is where the relevant supervisory authorities, major law firms and consultancies are based, there are excellent data lines to the entire world and we have an international airport on our doorstep,” he said.