Photographer: Luke MacGregor/Bloomberg

Value of Brexit Transition Deal Is Waning by the Day, City Says

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The value of Britain securing a transition deal to smooth its departure from the European Union is “disappearing by the day” until the details are nailed down, according to TheCityUK, which lobbies for financial companies.

The U.K. and EU must reach an agreement on the interim phase during the first quarter of next year at the latest, the lobby group said on Tuesday as it published a list of demands for the transition period. Failing that, there’s a “very high risk” that jobs, capital and inward investment will leave Europe entirely, said TheCityUK Chief Executive Officer Miles Celic.

“Firms are beyond the planning stage now: if they haven’t done so already, most will be ready to press go on their contingency plans in the new year,” Celic said. “They can still take their foot off the accelerator if a transitional deal is agreed, but without progress soon, it may be too late. Once businesses start moving, there is no reverse gear.”

The remarks reinforce the assessment last week by Chancellor of the Exchequer Philip Hammond that the transition deal is a “wasting asset” that will lose its value if it takes too long to broker. That’s because companies need certainty before making investment decisions, and banks need to ensure they can operate across borders after Brexit, which is due in March 2019.

TheCityUK called for the transition period to:

  • Be time-limited and legally binding
  • As close as possible to the status quo so that firms don’t have to make two sets of changes at the beginning and end of it
  • Be ‘one size fits all,’ rather than incorporating bespoke transitional deals for different sectors
  • Allow for the completion of an “ambitious and comprehensive” U.K.-EU free trade agreement
  • Allow for long-term contracts that are already negotiated to be honored
  • Incorporate a bridging period between Brexit and the date a new trade agreement is ratified, and a subsequent implementation period to give companies time to adapt to the new trade deal
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