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Teams across the City and Whitehall have been working over the summer to draw up a plan for Britain’s exit from the EU.
Officials and representatives from the financial sector are getting ready to present their policy ideas in time for them to be considered by the cabinet committee for Brexit, chaired by Theresa May, the prime minister, when it meets in early September, people involved in the preparations told the Financial Times.
The City has come to the conclusion that a deal for the UK to emulate Norway’s relationship with the EU is very difficult both politically and practically. Norway has access to the single market but no say in how regulations are set. It must both accept free movement of people and make budgetary contributions.
Instead, there is a preference for a unique trade deal, building on Switzerland’s arrangement.
A task force of grandees, chaired by Shriti Vadera, the chairman of
“There needs to be a bilateral deal providing as full two-way market access as possible,” said Anthony Browne, chief executive of the BBA, who has been part of Ms Vadera’s task force. “Both sides have an interest in making this work, as it is not in the interests of the other EU countries to be cut off from their main financial centre, especially at a time they are all seeking to boost economic growth.”
Mr Browne cited Switzerland’s trade deals with the EU that give some sectors, such as insurance, full two-way access to the single market via a so-called passporting deal in return for keeping its regulation at an equivalent level to that in the bloc.
Swiss banks do not benefit from any such trade deal, meaning they must do most of their EU capital markets business from their London subsidiaries.
But the City, which was overwhelmingly in favour of remaining in the bloc before the June 23 referendum, will argue that because the UK is the biggest export market for the rest of the EU it should be able to negotiate a beefed-up version of Switzerland’s arrangement. [...]
Financiers argue that it takes banks at least two years to move chunks of their business across borders — citing the time Bank of America took to move its vast derivatives book from Dublin to London. So they want early certainty that they will not face a moment in which their access to the EU market evaporates overnight.
They said that even if there were no gap between a new trade deal being agreed and implemented, big financial institutions will still need an adjustment period to update their IT systems and operational structures in line with the new arrangement.
Both the BBA and Ms Vadera’s task force — known as the European Financial Services Chairman’s Advisory Committee — have spent hours examining what access the City would have to the single market without a bilateral trade deal to replace EU membership.
They have found that many areas of the industry — such as cross-border lending and corporate deposit-taking — would be left without access to EU customers. Their work mirrors a parallel assessment being made by the Treasury. [...]
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