Developments continue at a rapid pace now for Brexit which perhaps is not surprising as many negotiations only get into the substantive elements near their conclusion. Maybe in some ways a two year negotiation period was always likely to lead to not much happening for 18 months and then a whirlwind of activity in the final six months? The UK’s new Secretary of State for Exiting the EU, Dominic Rabb, has already met with the EU’s lead negotiator for Brexit, Michel Barnier, for longer than his predecessor had in the last year.
Last Friday, Barnier finally gave some feedback on the UK Government’s white paper (see http://europa.eu/rapid/press-release_STATEMENT-18-4626_en.htm). Although the tone was positive, the message was clear in that the EU27 do not believe the UK’s proposals are workable. It is far from clear how much more room there is for further concessions from the UK and the warnings of a no-deal outcome have increased dramatically on all sides this last week including a call by the European Commission to “step up preparations for all scenarios and take responsibility for their specific situation” (see https://ec.europa.eu/info/sites/info/files/communication-preparing-withdrawal-brexit-preparedness.pdf).
However, there still is a sense that some form of deal will be done in respect of the UK’s future relationship with the EU. This could come at literally the 11th hour which means that uncertainty will continue for some time. Many business are now at the point (or soon will be) when they will have to put into action their Brexit contingency planning, something that is likely to be detrimental to the UK (although how much so is yet to be seen).
For the Financial Services sector, it is becoming clear that any trade arrangement with the EU 27 will not include financial services nor will mutual recognition be acceptable to the EU27. The UK is now proposing an enhanced equivalence approach which is different than the existing equivalence mechanisms that are included in various EU directives related to financial services. Given that the EU27 needs access to the UK, there is still quiet confidence that a solution will be found to allow firms on both sides of the channel to access each other’s markets.
Back in the UK, the Government has now passed the Taxation (Cross-border Trade) Bill after the government accepted amendments including commitments that, after Brexit, the UK will only collect tariffs on the EU’s behalf if the EU reciprocates, and that there will be no customs border between Northern Ireland and the rest of the UK. The Trade Bill 2017-19 also passed its final stages.
The UK Government has started publishing a number of statutory instruments that give effect to the UK’s withdrawal from the EU. On 16 July, the Government published a draft of the Financial Regulators’ Powers Regulations 2018 that sets out the proposed approach for the on-shoring of EU financial services legislation containing technical standards (see: http://www.legislation.gov.uk/ukdsi/2018/9780111171394/pdfs/ukdsi_9780111171394_en.pdf).
The Financial Services industry has welcomed additional information that is now being made public by the UK Financial Conduct Authority (“FCA”) and the launch of a new webpage for firms preparing for Brexit, including a number of questions to help a firm decide if it is conducting business in the EEA and the potential impact of Brexit (see: https://www.fca.org.uk/firms/preparing-for-brexit). The FCA had previously published a statement on 27 June in relation to its role in preparing for Brexit and confirmation of a temporary permission regime first announced in December 2017 (see: https://www.fca.org.uk/news/statements/fca-role-preparing-for-brexit).
We don’t expect much more to happen now until September when talks will intensify further in advance of a European council meeting to be held 18-19 October.