Tuesday 28 August 2018 5:10 pm | Updated: Friday 24 May 2019 7:45 pm

The impact of a no-deal Brexit should set off alarm bells for the City’s finance firms

Common Councillor and former Policy Chair at Canada Corporation on Carbon Markets.

Last week, the government produced papers assessing the impact of a no-deal Brexit scenario on various sectors, including financial services.

It is concerning for the sector that a no-deal scenario is looking increasingly likely.

The Bank of England governor Mark Carney ranks this possibility as “uncomfortably high”, while foreign secretary Jeremy Hunt suggested that there would be “unintended geopolitical consequences” should the UK crash out.

European leaders are also trying to evaluate the likelihood of a clean break from the UK-EU bond, which reaches its 45th anniversary this year. Latvia’s foreign minister Edgars Rinkevics has suggested the chance of a no-deal Brexit stands at “50-50”.

But what does a no deal mean for financial and other related professional services firms on both sides of the Channel? Essentially, it means a great deal of uncertainty – uncertainty where they can operate, who they can employ, and whether they can honour all their commitments to cross-border customers?

This is the reality facing firms if both sides walk away from the negotiating table.

This option would leave too many question marks looming over firms’ heads. It would be the worst of all possible scenarios.

It’s not just financial firms that would bear the brunt of a no deal. Consumers could see payments become slower, a hike in credit card charges, and even failure to pay out on pension and insurance plans.

Recent data reveals that in the past five years, the EU’s financial exports to the UK have increased by 51 per cent, while the UK has increased its exports to the continent by 35 per cent. These figures reiterate just how connected our markets are, and how vital it is that strong trade ties are maintained.

It’s very much in both sides’ interest to secure a deal that supports cross-border trade in services.

Earlier this year, the Bank of England made provisions for EU financial firms operating in the UK. The central bank and regulator committed to EU firms that, for up to three years after Brexit, they could continue operating here much in the same way that they do now.

So far, the EU has not reciprocated this gesture, which is a worry for UK firms operating in the bloc. It’s not enough to hope for the best and expect firms and regulators to work it out themselves. We need a clearer picture from EU regulators – both at European and national level – on how firms can continue activity across the Channel post-Brexit.

Last week’s paper went even further than the Bank of England’s announcement five months ago. It demonstrates how the UK is putting in place measures to protect against negative impacts in a no-deal scenario for UK-based customers and businesses, including EU firms doing business here. It is clearly over to the EU now to do the same.

The clock is ticking – there are just over 200 days until Brexit. It’s time that the EU clarifies how trading arrangements might continue post-Brexit, and takes steps to reciprocate the action taken by the government and UK regulators. If the EU fails to do so, it’s not just the UK this will affect, it will harm EU businesses and consumers too.