Issue of the week: Brexit transition angst
Prepare for regulatory and customs chaos unless an interim deal is found fast
“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”