Kristian Rouz – The upper chamber of the British Parliament has warned Prime Minister Theresa May that a hurried and unconditional separation from the EU would entail substantial losses in the UK’s financial services sector, with enterprises moving their capital and activities to New York.
Westminster, the upper chamber of Parliament said, that it needs to maintain its access to the EU’s surveillance and policy mechanisms. Such a deal on Brexit would significantly benefit both the Albion and the continent as a "hard Brexit" would result in financial companies avoiding both London and Frankfurt as major hubs of their operation.
Financial services companies are more inclined to move to New York than to elsewhere in Europe after a hypothetical "hard Brexit," a House of Lords committee said in its report on how Brexit would affect the financial sectors in the UK and EU.
"We therefore expect this to form an essential part of negotiations on the UK’s future relationship with the European Union, with the UK and the EU-27 sharing an interest in ensuring that there is no diminution in the level of safety and security afforded to their citizens," the House of Lords said.
Therefore, Prime Minister Theresa May needs to negotiate a comprehensive agreement with the EU on how the UK will exit the bloc with minimal losses and disruptions in financial sector operations on both sides of the English Channel, the Lords said.
The Lords also said that London boasts a unique financial infrastructure, which should be used a tool to boost the UK’s bargaining power in the Brexit talks. The EU’s access to the UK’s capital markets is as essential to Europe as Britain’s trade with the continent is to the UK. Maintaining ties between the finance hubs of London, Paris, Dublin and Frankfurt is crucial for the European prosperity, the Lords emphasised.
"Repatriation could happen. But the difficulties associated with replicating the services currently provided in the UK give us some hope that a deal might be reached that would be in the mutual economic interest of both the UK and the EU," the House of Lords committee said.
"The interconnectedness of the UK financial system presents serious difficulties for firms and the Government in determining the impact of changes to the relationship between the EU and the UK," the committee said.
Meanwhile, on the European side of the negotiations, signs of discontent have emerged. National governments and the EU parliament have thus far failed to produce a common platform to confront the UK. This might be an indication of the EU awaiting Britain to make the first step.
"We met briefly at the very end as 27 to talk about procedural questions, particularly cooperation between the institutions, in relation to Britain’s departure," German Chancellor Angela Merkel said. "But that isn’t a particularly urgent task because Britain hasn’t even filed its application under Article 50."
The disunity in the EU, and the UK’s internal debate could be resolved by putting an economic agenda as main priority, with a Brexit transition deal allowing time and guarantees for a mild and gradual Brexit.
"We find that a key priority will be to ensure that there is an adequate transition period, avoiding a ‘cliff edge’ both at the moment of withdrawal following the Article 50 process and as the UK and the EU move towards a new relationship," the House of Lords concluded.
