30 January 2018

Financial Times: Two-year transition for hard Brexit ‘practically impossible’

The UK proposals for a two-year Brexit transition will not work if London presses ahead with its plan to abandon the EU’s single market and customs union when leaving the bloc, Ireland’s junior finance minister has warned.

Michael D’Arcy calls for a rapid deal on transition as Brexit talks intensify in Brussels, questioning UK plans to settle new trade agreements within two years of the country leaving the bloc.

Companies want clarity soon over transitional arrangements so that they can put plans in motion a year ahead of the UK’s scheduled exit from the EU in March 2019, he says.

“We’re into a period of weeks now, not months, in relation to the transition period,” says Mr D’Arcy, interviewed by the Financial Times in his Co Wexford constituency base. The minister has political responsibility in Dublin for financial services and insurance, a portfolio dominated by Brexit as London-based institutions prepare to shift some operations from the UK capital ahead of Brexit.

Major international banks such as Bank of America and Barclays have resolved to move units of varying scale to Ireland, which is vying with Frankfurt, Paris, Luxembourg and other financial centres to take advantage of any business leaving the City of London.

Another 40 institutions are in talks with the Irish authorities to expand an existing presence in the country or move to it, Mr D’Arcy says.

“A lot of the companies now are in the process — in quarter one this year — of making their final decisions. So we’re going to know at that stage then what a lot of companies are going to do.”

His concern about the lack of clarity over the UK transition period reflects anxieties that banks, insurers and other institutions have expressed to him as a minister of state in Ireland’s finance department.

“Financial institutions have a single message and that single message is that they crave certainty. That’s what they want. They want to know what the decision is,” says Mr D’Arcy, a member of Ireland’s ruling Fine Gael party.

Dublin has called for a five-year transition, putting it at odds with the demands of the UK’s prime minister Theresa May for an implementation period of “about two years” while Boris Johnson, the UK’s foreign secretary, insists such an arrangement should last “not a second more” than two years.

Mr D’Arcy, an ally of Ireland’s taoiseach Leo Varadkar, says Britain would need more time to bed down new trade agreements if it leaves the internal market and customs union, as planned.

A lot of the companies now are in the process . . . of making their final decisions Concerned that a hard Brexit would undermine €65bn in annual bilateral trade between Ireland and the UK, Dublin wants London to change course and seek to remain in those institutions.

“I think two years is going to be really, really difficult, practically impossible if the UK leaves the single market and the customs union. I don’t think two years is possible to resolve those trade deals and the complexity of those trade deals,” Mr D’Arcy says. [...]

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