Brexit: Florence Last Hope for City

As scores of financial businesses sit poised to leave the UK, the Prime Minister’s speech in Florence today is being seen as a point of no return and the last hope for securing a clear and early Brexit deal. Critics fear that the speech will end up being a vain bid to sidestep EU negotiator Michel Barnier with an “open and generous” cash offer in the hope of buying the UK’s way into the trade negotiations that Westminster desperately wants to launch.

The representative body for UK-based financial services, TheCityUK, has warned that Florence is “crunch time”, making an ominous comparison to the Italian city’s own decline into being a backwater in international finance.

“Florence was once a powerful European financial centre but lost its position as other better-connected centres arose elsewhere,” said Miles Celic, its chief executive officer (left).

“We don’t want to see the same thing happen to the UK, or indeed to Europe as a whole. Both sides must seize this opportunity to move these negotiations forward, put people and jobs first and get a transitional deal done without delay.”

Transition Clarity

One of the dominant topic of the Florence speech will be the transition period that businesses want to see following Brexit.

There is also an expectation that a divorce fee will be promised as well as some detail on the Irish border, although it is hard to see how either of those issues will be discussed in much detail beyond some general declarations of intent.

Celic insisted that it was essential that details of the transition period should be confirmed.

“While negotiators have recently been talking about the importance of transitional arrangements, little progress has been made. For our industry, this really is crunch time. We need the UK and the EU27 to agree a time-limited and legally-binding transition period that resembles the status quo as closely as possible and applies across all sectors of the economy,” he said. “Many firms are already moving parts of their operations out of the UK and Europe. When they’ve gone, it’s hard to see them coming back.”

That crunch time will likely see many firms making their final decisions on whether they should stay in the UK, and Celic warned that if this delayed speech fails to give the required clarity and certainty then they will leave.

“Even if the UK and EU agree the best possible Brexit deal by 2019, without urgent clarity on transitional arrangements, business will assume the worst and act accordingly,” he said. “Ultimately, this will be bad for customers, bad for businesses and bad for the British and European economies. Post-Brexit, it will fragment the market, hinder the provision of essential financial services to EU and UK enterprises and governments and likely increase the cost of products and services for customers right across the continent.”

The Cabinet

While banks and other industries have been pressing for clarity the Government has been distracted by infighting.

Boris Johnson was thought to be considering resigning as Foreign Secretary when he said he “could not live with” a Swiss-style Brexit in which the UK pays for access to the single market.

On the way out of a two and a half-hour Cabinet meeting on Thursday that discussed May’s speech Johnson gave a deliberate gesture of unity by smiling alongside Chancellor Philip Hammond, who has led the push for a “softer” Brexit transition than Johnson would like.

The Prime Minister is understood to have won broad support from across the Cabinet with concessions to the key concerns of both hard and soft Brexiteers. Today’s speech will prove whether those smiles marked genuine hope and resolution or just another false start in a tortuous saga.

by Stewart Vickers

 

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