Trade body the Personal Investment Management & Financial Advice Association (PIMFA) has welcomed the fact that the UK and the other EU member states have reached agreement on a Brexit Withdrawal Agreement, and on the accompanying Political Declaration.
The Agreement provides for:
- A transition period, lasting until at least December 31 2020, during which the existing trade relationship between the UK and the EU will be maintained. (The UK is scheduled to leave the EU on March 29 2019)
- The transition period to be used to allow the UK and EU to negotiate a longer-term trade deal
- If no long-term trade deal can be agreed, what the media are widely calling the “backstop” would be activated, whereby the entire UK, including Northern Ireland, would remain in a “single customs territory” with the EU member states
Specifically regarding financial services, the Agreement suggests that while the UK will not be bound by EU rules on financial services after Brexit, the two sides will continue to review the “equivalence framework” and that the two sets of rulebooks could yet remain closely aligned in the longer term.
PIMFA CEO Liz Field said:
“It is very important at all times, but especially in periods of uncertainty and change, that PIMFA member firms receive clear indications of the direction of political and economic travel over a reasonable time period in order to plan their business development strategies and commit resources appropriately to service their clients’ needs. The proposed draft achieves this by ensuring in its transition arrangements a minimum sensible period for our firms to make necessary changes for operating from the UK as a 3rd country, rather than as an EU member state.
“The possibilities for lengthening transition are also welcome in this context, and overall the prospect offered of a sensibly managed withdrawal from the EU with a one-step change for our firms at the end of transition will minimise disruption to business. Given the significance of the UK financial services industry, ensuring stability and maximising the prospects of protecting retail investors are key concerns for the future. Very clearly, further detail is needed to ensure that the UK can continue to operate as one of the leading wealth management and financial advice centres in the world.”
However, this may of course not be the end of the story. The Agreement has been approved by the UK Government, but not by the UK Parliament. Should Parliament reject the deal when it votes on the matter next month, all possibilities remain open, including: further negotiations between the UK and EU with a view to a revised agreement, a referendum on the terms of the UK’s exit, the resignation of the Prime Minister and another Conservative MP taking the helm, another General Election, or the UK exiting the EU without an agreement. The last of these is the so-called ‘no deal’ scenario. In a ‘no-deal’ situation there will of course also be no transition period.
A number of Financial Conduct Authority (FCA) executives have given speeches on Brexit in recent weeks. Nausicaa Delfas holds the official title of Executive Director of International, but she is often referred to by the media as the FCA’s “head of Brexit”, and she told a City and Financial UK Financial Services Brexit Summit that the regulator was preparing for a possible ‘no-deal’ by introducing a temporary permissions regime that would allow EU-based firms to continue trading in the UK for a limited period, before then applying for FCA authorisation at a later date. Her speech also advised UK-based firms to seek legal advice on what a ‘no-deal Brexit’ might mean for them.
At the Association of Professional Compliance Consultants (APCC) Autumn Conference, FCA Director of Authorisations Sarah Rapson warned that there are currently no plans for reciprocal temporary permission arrangements for UK-based firms that currently do business in the EU, i.e. they could abruptly lose their authorisation to trade in Europe come Brexit day, as they would not have permission from the relevant European national regulators.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article