Yesterday the government and EU began the formal process of Brexit, with the triggering of article 50. Newspaper headlines today may suggest that alongside this we are immediately seeing some radical changes: the government introduces ‘a Great Repeal Bill’ washing away EU rules and we see the start of an exodus of banks and insurance brokers from London.

The reality is rather different.

What we saw today were plans by the UK Government and by UK financial services to ensure a smooth continuity of service on the day we leave the EU in 2 years’ time.

The Government published proposals for ensuring EU law seamlessly becomes UK law when we leave the EU, in its White Paper on ‘the Great Repeal Bill’. And Lloyd’s joined other financial services organisations in the City of London in announcing plans to ensure that they can continue to provide a seamless service to their customers on the day the UK leaves the EU.

This is about making the minimum change necessary to adapt to the (admittedly fundamentally different) world outside the EU.

The government’s Great Repeal Bill has been dubbed the ‘great cut and paste bill’ as it carries over EU law into UK law. This ensures legal continuity and stability for businesses and citizens. It addresses a few of the legal issues that Brexit throws up:

  • Over the last 44 years, much of the UK legal and regulatory system is based on and intertwined with EU law and EU institutions. Across the economy, society and environment we have EU rules and agreements. Leaving the EU would leave a massive legal and regulatory vacuum unless something is put in its place.

  • Untangling all this EU law is incredibly complicated and if done on a case-by-case basis will take an eternity. We have only 2 years (and counting). Lawyers are finding that untangling EU law is like pulling at a thread –the more you pull, the more keeps coming.

  • As well as EU laws we also have EU institutions that supervise activities in the UK (eg the European Medicines Agency which supervises medicines across Europe; the European Aviation Safety Agency etc.).

  • Until the full Brexit negotiations are complete we will not know exactly what legal changes are needed and what supervisory bodies need to be replicated in the UK. However, by then it will be too late to introduce detailed UK legislation, debated in parliament, in time for Day One outside the EU. So some process is needed to change laws quickly and easily.

  • It is also worth noting that we may not have the capacity to create fully functioning UK agencies in time for Brexit to take on regulatory and supervisory roles form EU bodies – and therefore we may continue to depend on EU bodies for a transitional period whilst we recreate our own organisations.

  • Many areas of economic activity depend upon EU case law under the European Court of Justice. If this is removed then there are big gaps in case law.

The Government proposes to tackle this by:

  • A general Act of Parliament that carries over all existing EU law into UK law. This will come into effect the day we leave the EU.

  • Powers to introduce secondary legislation to make changes without a full Act of Parliament and without a full debate and scrutiny in Parliament.

  • Some protection against the abuse of secondary legislation powers, by specifying that any significant policy changes in law will require separate legislation. For this reason, the government will bring forward separate legislation on a new UK customs regime and a new UK Immigration regime.

  • European case law (judgements by the European Court of Justice) will be transferred into UK case law. This addresses a question often debated by some of my colleagues around VAT case law; EU Court of Justice case law has over the past four decades clarified what is and is not subject to VAT; the government has confirmed that will transfer to Uk case law as “ failing to follow that case law in our own legal system would create new uncertainties about the application of VAT”.

The ‘Great Repeal Bill’ white paper therefore provides a basis for ensuring continuity and keeping open our options to enable a bit of agile law making as the detailed Brexit deal emerges.

That is pretty much the same rationale behind the decisions being taken by London financial services institutions on establishing offices in other EU cities.

Today Lloyd's of London announced it would establish a presence in Brussels from 2019, to ensure it retains ‘passporting rights’ across the EU after Brexit. This is planned as a small office – their HQ will remain in London (which services global markets beyond the EU) – but we can expect a cluster of brokers to establish offices around it. This follows other announcements of similar plans: as well as Lloyd's in Brussels, ‎AIG is establishing operations in Luxembourg and London insurer Beazley will hire additional staff in Ireland to establish a European insurance company in Dublin after the Brexit vote. In investment banking HSBC is moving some EU roles to Paris, Goldman Sachs is planning additional capacity in Frankfurt and Paris and JP Morgan was reported today to be looking at Dublin.

These moves should not be seen as an exodus from the City. They are contingency plans that ensure they have a licenced presence able to continue to serve customers and clients in the EU. They are more about ensuring continuity than radical change. What is interesting is that the emerging picture is one of a dispersal across EU cities at this stage – no EU city is emerging as the new EU financial services centre yet.

A final point: the impact of Brexit on the business environment is now being shaped by more than the UK government.

Businesses have been planning over the last nine months and we are now seeing them act on those plans before the government negotiations really get underway. The start of negotiations with the EU also means that a wider range of players will be shaping the future business environment – the European Council and the European Parliament. The UK government’s white paper today provides a very welcome basis for stability in many areas for business. But business and markets will continue to take their own actions to ensure certainty and stability without waiting for governments.