Britain, EU drawing flurry of deals to cushion blow

LONDON: As Britain tries to steer away from a dreaded “no-deal” divorce with the European Union (EU), a flurry of agreements are being hammered out to cushion the most painful blows.

The government’s own assessment admits that its best efforts have been unable to shield swathes of the economy from “a range of significant impacts”.

It said this week that just 40,000 of 240,000 businesses that trade only with EU nations had obtained the required customs clearance numbers.

These dangers have prompted Prime Minister Theresa May to give parliament a chance to delay the March 29 Brexit deadline by up to three months.

Here is a look at what London and Brussels have been doing to keep store shelves stocked and financial markets running if worse comes to worst:

Few of the stop-gap measures are as important to the wider world than the one bankers reached with an EU regulator called the European Securities and Markets Authority (ESMA) last week.

London is the global capital of a complex but vital financial instrument called derivatives. Traders buy these to insure themselves against sudden interest or currency exchange rate swings.

The EU derivatives market was notionally valued last year at €660 trillion ($750 trillion) – nearly 300 times the size of Britain’s entire economy.

The ESMA and London’s three derivatives clearing houses — institutions where these transactions are finalised — now have a one-year licence to keep working together in case of a no-deal.

High-speed trains moved more than 20 million tonnes of freight and nearly 11 million passengers through the 50km Channel Tunnel linking Britain and France last year. The EU’s executive body announced plans on February 12 to keep this link operating for three months in a worst-case scenario.

But it would require Britain to adopt EU rail safety standards and is meant to be “limited in scope.”

A confidential UK government report leaked to the Financial Times predicts queues of up to 15,000 passengers if French authorities unilaterally impose strict passport controls.

The European Council meanwhile provisionally agreed with the European Parliament last week to allow British-owned airlines to fly to the other 27 nations for seven months without a deal.

But they might not be able to make intra-EU connections and will probably have to change their ownership structures to maintain long-term access.