LONDON (Reuters) – Britons residing within the European Union may lose entry to their UK checking account companies and companies on the continent could possibly be reduce off from funding banks in London if there’s a no-deal Brexit, the British government mentioned on Thursday.
FILE PHOTO: A Union Jack themed Visa bank card is seen amongst British forex on this photograph illustration taken in Manchester, Britain March 13, 2017. REUTERS/Phil Noble/Illustration
In a doc detailing contingency planning if Britain leaves the EU in March with no transition deal, the government mentioned unilateral motion on a number of fronts may solely minimise disruption up to a degree.
While Britons will nonetheless be capable of use their financial institution playing cards to withdraw cash in EU international locations, over one million UK residents residing overseas could not be capable of use their British accounts for borrowing and deposit companies, or insurance coverage contracts resembling annuities that pay pensions, the doc mentioned.
Banks providing these companies may be affected. “This could impact these firms’ ability to continue to service their existing products,” it added.
All Britons will face larger prices to make card funds within the EU when travelling or procuring on-line.
The EU agreed this 12 months to cap the charges retailers pay to course of debit and bank card transactions. Without a deal between London and Brussels, British clients will now not be coated by a ban on cross-border surcharges, which prevents business from imposing extreme prices on customers.
The government had beforehand mentioned these prices value Britons about 166 million kilos in 2015.
“Leaving the EU without a deal would cause major inconvenience to millions of pensioners, travellers and drivers,” mentioned Hugh Savill, director of regulation on the Association of British Insurers.
Currently banks, insurers and fund managers in Britain have unfettered entry to the EU, their largest export market, price 26 billion kilos final 12 months, beneath the bloc’s “passporting” guidelines.
Without a deal, banks, insurers and pension suppliers would have to determine operations within the EU or be legally barred from serving purchasers or sending out funds.
Brexit minister Dominic Raab performed down the menace that tens of 1000’s of British retirees within the EU – lots of whom reside on the Spanish Mediterranean coast – may lose entry to their pensions.
“It’s hardly in the interests of southern Spain to do harm to the UK pensioners out there,” Raab instructed reporters.
The government mentioned it was dedicated to giving regulators such because the Bank of England and the Financial Conduct Authority a “general transitional tool” to part in modifications easing the influence if no deal is agreed.
However, the EU would additionally have to take motion to keep away from disruption in cross-border monetary companies, it mentioned.
Brussels has mentioned it’s primarily as much as banks and insurers themselves to arrange for Brexit, resembling by opening new hubs within the bloc.
EU ACTION NEEDED
The doc mentioned the EU wanted to reciprocate British motion to make sure continuity in cross-border insurance coverage insurance policies, derivatives contracts, and core market companies for firms and folks. Without EU motion, it mentioned, companies throughout the bloc may now not use funding banks in Britain.
Brussels, for instance, would wish to offer traders within the EU permission to proceed utilizing a share buying and selling platform or clearing home in London, the place most euro-denominated derivatives are presently cleared.
The finance ministry and the Bank of England will give particulars subsequent month on how clients in Britain can proceed utilizing a settlement home within the EU, a crucial step whereby money is exchanged for authorized possession of a stock or bond.
Fund managers within the City of London function many funds listed within the likes of Luxembourg and Dublin, and the plans mentioned Britain was able to agree cooperation preparations with the EU as quickly as potential to make sure this might proceed.
“The stark fact is that there can be no continuity without EU reciprocity. Mutual interest may point to some deal, but the EU holds all the cards,” mentioned Simon Morris, a monetary companies lawyer at regulation agency CMS.
Reporting by Huw Jones and Andrew MacAskill; modifying by William Schomberg, Adrian Croft, Larry King and David Stamp