We need Brexit deal by Christmas to stop banks leaving

Carney’s deputy issues warning over need for transitional agreement

A TRANSITION deal on Brexit must be nailed down by Christmas or City firms will shift staff overseas, a Bank of England chief has warned.

Deputy governor Sam Woods warned that lenders will activate their contingency plans to avoid uncertainty unless Brussels and Britain agree a pause before the country leaves the EU.

The UK is pushing to hammer out details of a two-year transition period that would give businesses time to adapt to any new trading regime.

Speaking at Mansion House in London, Woods said it was very much in the European Union’s interests to see sense.

He added: ‘While it is highly welcome that the Government is clearly committed to this, the EU’s position on transition is not yet clear – despite some obvious risks to EU financial stability in its absence.

‘If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in. Firms would start discounting the likelihood of a transition in the central case of their planning.’

Without a legally-binding transition deal by the end of the year, banks would have to start applying for licences in the first quarter of 2018 to allow enough time for regulators to process them.

‘The impact of this first phase of contingency planning on jobs will be relatively modest,’ said Woods, who is head of the Bank’s Prudential Regulation Authority responsible for overseeing the health of the banking system.

He also stressed the vital importance of London as a trading hub, pointing out that the PRA regulates around 170 international banks from more than 50 jurisdictions, including every globally important lender – more than any other EU nation.

‘On almost any measure, we are the host with the most,’ Woods said. ‘The UK provides unrivalled access to global capital markets.

‘International banks from Asia to the Americas use their UK presence to raise finance on behalf of their home group. Since the first Eurobond in 1963, which financed the Italian motorways, international banking in London has driven growth in real economies around the world.’

Brexit poses ‘material risks’ to the Bank’s objective to maintain stable lenders, but ‘we are on the case in dealing with them’, he said. In April, he asked 400 City firms for their Brexit plans, including if there is no EU deal.