Is­sue of the week: Brexit tran­si­tion angst

Pre­pare for reg­u­la­tory and cus­toms chaos un­less an in­terim deal is found fast

The Week - - Talking Points City -

“Clar­ity is more im­por­tant than per­fec­tion to busi­nesses. They just want to know.” It wasn’t dif­fi­cult to de­tect the note of frus­tra­tion in the voice of one busi­ness chief who at­tended a tea party in Down­ing Street this week to dis­cuss Bri­tain’s de­par­ture from the EU, said the FT. As he ob­served, the lack of in­for­ma­tion over a post-brexit set­tle­ment is “the most wor­ry­ing el­e­ment for com­pa­nies try­ing to plan now for 18 months down the line”. And a Tory civil war has hardly made things eas­ier. Com­pa­nies are con­vinced that a tran­si­tion pe­riod af­ter March 2019 is “ab­so­lutely es­sen­tial”. Yet the PM seems to be step­ping up prepa­ra­tions for the pos­si­bil­ity that Bri­tain will exit the EU abruptly “with­out a trade deal”, amid reg­u­la­tory chaos. Her cus­toms white pa­per out­lines “a con­tin­gency plan” in which traders would need to present goods for in­spec­tion “as far in­land as pos­si­ble”, to avoid clog­ging ports. It also floats the idea of com­pa­nies “self-as­sess­ing” im­ports.

“The point is not sim­ply that a deal needs to be done,” but that “it needs to be done soon”, said Pa­trick Hosk­ing in The Times. The City, in par­tic­u­lar, ur­gently wants an agreed tran­si­tional deal – and “things are start­ing to get press­ing”. There is now a very tight time frame “to agree a deal to avoid an ex­o­dus of ta­lent and jobs”. The Chan­cel­lor, Philip Ham­mond, “gets it”. He has de­scribed the pu­ta­tive tran­si­tion pe­riod as “a wast­ing as­set” – the longer it takes to nail down, the less valu­able it be­comes. In the mean­time, Deutsche Börse has made an­other at­tempt “to lure part of the euro clear­ing mar­ket to Frank­furt”, said Nils Prat­ley in The Guardian. Amid the im­passe over the tran­si­tion, “Frank­furt sees an op­por­tu­nity to grab a slice of a lu­cra­tive mar­ket”. Most City-based banks “don’t want to trig­ger their con­tin­gency plans”, but they’re obliged to plan for the pos­si­bil­ity that the EU may is­sue new rules forc­ing some fi­nan­cial ac­tiv­i­ties to re­lo­cate. “The longer this goes on, the greater the risk to City jobs.”

“The Bri­tish peo­ple didn’t vote for a revo­lu­tion,” said Si­mon Nixon in The Wall Street Jour­nal: they sim­ply voted to leave the Euro­pean Union. “Yet ul­ti­mately the odds are stacked against those who want to pre­serve as much as pos­si­ble of the cur­rent or­der.” And now the clock is tick­ing. “Sooner or later, hard de­ci­sions must be taken – and if the po­lit­i­cal sys­tem proves un­able to take them, the UK will slide to­wards a chaotic EU exit, in which reg­u­la­tory and tar­iff bar­ri­ers to trade go up.” Make no mis­take, Brexit poses the risk of “an abrupt end to the old eco­nomic or­der”.

The City: “things are start­ing to get press­ing”

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