7 November 2018
The British agriculture ministry recently advised UK tourists planning to travel with their pets after Brexit to mitigate no-deal Brexit risk by seeking veterinarian clearance four months in advance, a somewhat less efficient process than the current, seamless process. These pet sounds are a microcosm of a broader issue: whereas once cross-border activities were painless, post-Brexit, the future will be less so.
The holiday fate of Fido, Tiddles and their four-legged brethren hangs in the balance. Yet all is not lost. UK and EU negotiators are reportedly finalising longer term UK-EU customs arrangements, principally so as to cut through the Gordian knot that is the Irish border problem. Such a customs solution should of course facilitate the transfer of goods and people cross-border and therefore be welcome to manufacturers and pet-owners alike.
Jointly agreed customs arrangements, whilst economically beneficial, will be of limited value to service industries. Here, a separate solution is required. So there was understandably relief in some quarters when it was recently reported that a preliminary agreement for the continuity of financial services. This would be based around the principle of equivalence, under which cross-border activities are permitted where there is a positive assessment from the European Commission regarding the alignment of rules. The fragile nature of these rules, with the Commission able to cancel with 30days notice, has been noted by many. Less remarked upon is the limited scope of equivalence: it does not cover areas such as securities trading, corporate lending and insurance, which are not covered by relevant EU directives. Even those areas which are in principle covered by equivalence, such as recognition of exchanges and clearing houses, is subject to a time-consuming regulatory application process, which is by no means guaranteed to conclude before the end of the transition period. Suddenly, four months notice for travelling with pets seems remarkably efficient.
A comprehensive customs solution is the sine qua non of the Brexit negotiations: without this, the Irish border hardens, a Withdrawal Agreement retreats, and a cliff-edge Brexit beckons. The intense focus on this aspect of the agreement invariably means that financial services becomes an afterthought, and some details, such as those required to provide for contractual continuity, may be overlooked. So intense vigilance will be essential in this run-up period, to clearly understand what is and is not within the scope of any proposal, so that implementation plans can be updated and contingency plans prepared. Fido and Tiddles may have to wait a little longer for their next visit to the continent.
If you'd like to learn more about what Brexit means for the financial services industry, download our white paper:
The impact of Brexit on Financial Institutions.
Or directly contact: