Government urged for more clarity on Brexit before city firms activate contingency plans
SQUARE Mile firms will begin activating their Brexit contingency plans unless the government provides clarity over a transition period by year-end, the City of London Corporation has warned in a letter to the Chancellor.
Catherine McGuinness, the corporation's policy and resources chairman, told Philip Hammond that it was "critical" that UK-based financial services firms have "urgent clarity" from the UK and EU on "time-limited, legally binding transitional arrangements" as well as the principles that underpin them.
"While businesses will have different cut-off points for activating contingency plans, clarity will be needed by the end of this year," Ms McGuinness wrote in a letter to the Chancellor.
If delivered in time, those details could allow companies to slow, or even scrap, their contingency plans, she said.
"For businesses that have already begun activating contingency plans, clarity on transition will allow them to decelerate those plans.
"For others, it may help them avoid taking unnecessary contingency measures entirely. The earlier transitional arrangements are agreed, the more value they will have for businesses and their customers."
The letter, written ahead of the Chancellor's Budget on November 22, also included calls to cut tax rates down from 17 per cent for corporate treasury centres, which are common among Asian multinationals and operate as in-house banks for their businesses.
The City of London Corporation wants to make UK rates competitive and "allow London to win more business from Asian rivals" including Singapore and Hong Kong, who tax at 8 per cent and 8.25 per cent, respectively.
It was part of a broader call to action on fiscal policy, which Ms McGuinness said "must go beyond Brexit considerations".
But Germany's financial regulator warned earlier this week that Britain is nearing a "point of no return" for financial services firms, which are unable to wait much longer for a mutual recognition agreement that would allow them to continue serving customers in each others' markets.
Speaking in London yesterday, Bafin president Felix Hufeld said that it will be hard for companies to stall or halt plans if Britain fails to strike a deal by the first quarter of 2018.
"Have we already hit a point of no return? I don't think so. But we're getting closer," he said.
A number of global banks and insurers are preparing to relocate business and staff from London to the continent in order to secure their EU operations, with many looking to the likes of Frankfurt and Dublin as their new continental home.
London lobby group TheCityUK also warned last week that financial firms will pull the trigger on "irreversible" Brexit job relocations in the new year unless the Conservatives agree a transition deal imminently.
It also said that the value of a transitional deal is "disappearing by the day".
"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. It is simply not efficient or economically viable to move operations twice."
TheCityUK argued that, to avoid this scenario, an agreement must be reached by the first quarter of 2018 "at the latest".