Now is not the time for stalling

Tony Ward

September 25, 2017

Tony Ward is chief executive of Clayton Euro Risk

So, there’s a chance we might avoid the notorious cliff edge, then.

I was pleased to see Prime Minister Theresa May (pictured) announce plans last week for a two-year transition period, during which trade with the European Union should continue on current terms.

EU migrants will still be able to live and work in the UK but they will have to register with the authorities. In return, the UK will pay into the EU budget so member states are not left out of pocket.

Finally, when the two-year transition period is up, the UK and EU could move towards a new ‘deep and special partnership,’ she said in her speech in Florence.

Whatever that means.

Good news, then. In recent blogs, I have argued for this transition period as a way of reassuring businesses, giving them time to restructure their operations and avoiding the potentially very nasty drop they were facing in March 2019.

However, not so fast. As readers of my blog know with these major announcements, the devil is most definitely in the detail.

In response to Mrs May’s comments, the CBI and other business bodies called on negotiators to move quickly to talks about trade and transition.

Carolyn Fairbairn, director general of the CBI, said: “The prime minister’s speech has set a positive tone and we now need leadership from both sides to turn the proposals and principles into decisions and action.” She added that ‘tangible progress must be made next week’ when the two sides continue talks.

Stephen Jones, chief executive of UK Finance, also welcomed Theresa May’s plans for a two-year buffer. However, he advised that EU and UK negotiators must act quickly to avoid ‘damaging impacts’ on both side of the Channel.

“We do need any early agreement on transition by the end of the year at the latest,” he said. “This has to be done quickly so businesses can avoid activating further contingency plans.” These are plans, presumably, that would move jobs to the continent.

Of course, we are talking specifically about financial services.

A number of banks have already announced plans to move staff to European cities so they can continue to serve clients across the EU.

Royal Bank of Scotland has confirmed it will move staff to Amsterdam by next March if there is no clear Brexit deal.

Ross McEwan, the lender’s chief executive, warned that the timing of Brexit negotiations was becoming increasingly urgent for the City.

“We need some pace on it now,” he declared. “By the end of the first quarter of next year if we don’t know what the banking arrangements with Europe look like, we will have to start activating our plans.”

He noted that RBS served 250 large corporates in Europe and had tens of thousands of British customers who were depending on the lender to be able to access Europe’s markets without disruption.

And they are not the only ones.

HSBC is planning to move 1,000 workers to Paris if Britain fails to secure a trade deal before formally leaving the EU in 2019. In fact, the City of London believes that 9,770 roles are risk so far, based on official announcements, with Frankfurt likely to receive the lion’s share.

Miles Celic, chief executive of lobbying body TheCityUK, said: “The ball is now firmly in the EU’s court and the clock is ticking. Any further delay in progressing negotiations risks additional and unnecessary economic disruption for customers across Europe.”

The group had warned that the UK is in danger of losing its place in the financial world in much the same way that Italy did after the Renaissance. TheCityUK said companies are already moving jobs overseas as Britain prepares to leave the European Union.

Further faltering in Brexit talks, it warned, will lead to irreversible decisions. “Even if the UK and EU agree the best possible Brexit deal by 2019, without urgent clarity on transitional arrangements, business will assume the worst and act accordingly,” Mr Celic concluded. Agreed.

Now is not the time to dither but act decisively and reassure our businesses and services with detailed plans.

As Adam Marshall, the head of the BCC said: “In the world of business, the PM’s Florence speech will be judged not on its rhetoric or delivery, but on whether it begins to break the stalemate that has left companies across the UK, Europe and around the world counting the cost of uncertainty.”

A tick in the box then but more detail is required – and required before it’s too late.

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