The Treasury is to begin the process of putting together contingency plans to support the City should the UK exit the European Union next year without new terms governing trade in financial services.
In a regular update obtained by the Times, the department said that its core planning still assumed a two year managed exit, but that it was increasing readiness for other scenarios.
‘The government will ensure a workable legal regime . . . whatever the outcome of negotiations,’ it noted. This would mean handing additional rule making powers previously held by EU bodies to UK regulators and establishing a licensing regime to allow European companies to continue to operate.
It is likely to introduce statutory instruments – changes to legislation which do not require parliamentary approval – governing capital markets and prudential regulation in the Autumn.
In parallel to its attempts to sign Conservative MPs up to its Chequers plan, the government has mollified Eurosceptics recently by emphasising the amount of preparation it has committed to a hard Brexit.
Secretary of State for international trade Liam Fox this week went as far as saying that he believed it was more likely than not that the UK would leave the EU without a replacement deal, saying that EU ‘intransigence was ‘pushing us towards no deal’.
While trade bodies and professional associations have made clear they do not welcome being cut off from European markets, some of the leading Brexiteers in the financial sector have cheered the prospect of a hard, fast break from the EU.
Speaking to Bloomberg this week Hargreaves Lansdown co-founder Peter Hargreaves described this as the ‘best option’ for the UK.
Guaranteeing his ‘entire wealth’ of £3.6 billion on no deal being the best option, he said: ‘No deal would give us free trade with Europe because the three biggest economies in Europe, outside Britain, are huge exporters to the UK.
‘That’s Germany, France and Italy. And those three economies would absolutely demand free trade from the EU. I guarantee my entire wealth that we would get free trade.’
Sterling has in the last week slumped to a recent low against the euro and a year low against the US dollar as currency markets began to digest the possibility that negotiations could fail.