EU firms scramble to stay in the City in no-deal Brexit

More than 1,000 EU firms have expressed their interest in taking up the UK's offer of continued access to the City in the event of a no-deal Brexit, according to the Financial Conduct Authority (FCA).

The City watchdog's international director Nausicaa Delfas said around 1,300 EU firms were seeking to trade within the FCA's temporary permission regime, an arrangement that will allow firms and investment funds in the European Economic Area to continue operating in the City without impediment for three years after a no-deal scenario, to minimise cliff-edge risks.

Miles Celic, chief executive of lobby group TheCityUK, said the clamour to join the regime demonstrated that the UK's status as Europe's financial centre "would not change".

“This is demonstrated by the keen interest that EU firms have shown in making sure they do not lose access to London in the event of a no-deal Brexit," he added.

Last week European Commission Vice President Valdis Dombrovskis indicated that the EU would not seek to prevent European firms from accessing London's clearing houses. The concession followed months of lobbying from businesses on both sides of the channel, who feared a spike in costs should the City's clearing institutions no longer be available to EU firms.

Agreeing the future regulatory and trading relationship for financial services has been one of the biggest behind-the-scenes battles of the Brexit negotiations. Despite the advanced planning for a no-deal Brexit, spearheaded by the Bank of England and the FCA, City minister John Glen said yesterday he was “extremely confident" the two sides would reach an "imminent deal" for the financial services sector.

“There is common ground," he said. "That is why we are increasingly positive on the expectation of reaching a deal. There is no competitor worthy of replacing us."

Treasury sources downplayed Glen's comments, insisting that a deal is still being worked out.

Business groups were keen to strike a cautious tone while they waited for an official announcement on the terms of any arrangement. The Institute of Directors (IoD) said that while assurances were welcome, "businesses won't be celebrating just yet".

"This sector is one of the UK’s greatest assets, and reaching a deal quickly with the EU will provide companies greater scope to plan and invest for the future. The priority, however, must be getting a Withdrawal Agreement in place so that we can move onto our future economic partnership.”

A spokesperson for the Confederation of British Industry said: “The government’s number one priority has to be securing a Withdrawal Agreement with the European Union, so firms can enter the transition period and start to navigate the future with more certainty.”

Chair of the Treasury Select Committee Nicky Morgan said: “Financial services make a substantial contribution to the UK economy, not least through taxes to the Exchequer. The longer the uncertainty surrounding post-Brexit lasts, and the closer we get to 29 March without a deal, the more likely it becomes that financial services firms will be forced to execute their contingency plans fully and move services, jobs and taxable profits outside of the UK. A deal on financial services can’t come soon enough.”