Failure to agree deal ‘will lead to instability and fragmentation’
FAILURE BY Britain and the EU to reach agreement on continuing access to financial markets after Brexit risks creating instability and market fragmentation, a parliamentary committee has warned.
The Lords EU Financial Affairs sub-committee said it was in the interests of both sides to reach a deal which allowed the continued free flow of financial services between them.
It emphasised also the pressing need for agreement on a period of transition after the UK leaves in March 2019.
Without it, the committee said, firms would be forced to activate their “worst-case scenario” contingency plans with “stark implications” for financial stability.
The dangers of disintegration were already apparent in proposals which could see some financial clearing activity required to relocate to the EU due to “political rather than purely economic calculations emerging in the broader Brexit negotiations”.
“Open and globalised capital markets are in the interests of both the UK and the EU,” it said.
“In agreeing the relationship between the UK and the EU postBrexit, both sides should favour an end-state allowing mutual market access.
“Fragmentation would lead to costs increasing and to financial stability deteriorating.”
In order to be successful, the committee said the transition should allow a “standstill” period to enable the two sides to settle their new relationship, followed by a “seamless” start to trading under the new terms.
The sub-committee chairman Baroness Falkner of Margravine said: “There is a risk of market fragmentation and financial instability if the UK loses access to the EU.”