The London Stock Exchange is the latest institution in the City to announce that it is activating No Deal Brexit contingency plans. Across financial services, our clients and contacts have been planning for No Deal, as the best way of ensuring they can continue to serve customers. Every so often there is a moment of doubt and I am asked whether they did the right thing - did they overreact in planning for No Deal? I am confident in reassuring those with No Deal plans that their planning assumptions are robust:
- the government and parliamentary rebellions, rows and resignations of July will look like a picnic compared to the political bloodbath we can expect in the autumn.
- this political instability makes No Deal ever more likely. That should reassure all the financial services businesses who have planned for No Deal that they have done the right thing.
- the government's abandonment of mutual recognition for financial services in its White Paper (instead proposing an enhanced "equivalence" that can be withdrawn by the EU at any time) also reinforces the rationale for planning for No Deal. Even if a trade deal is agreed with the EU it seems unlikely to be much better than No Deal for financial services.
There are two other things that financial services (and other businesses) might consider for the autumn:
- with the EU issuing advice to citizens and businesses to be prepared for No Deal - and with political carnage in the autumn - you can expect more clients to ask questions about your Brexit planning. Communications will be important after the summer break.
- Theresa May was one vote away from calling an election two weeks ago (in the face of possible Parliamentary defeat on the Customs Union). An election is an ever present possibility. That means firms should also think about "what if there was a Labour government" - what regulatory and tax changes would impact on business models?
The London Stock Exchange is executing its contingency plans for a hard Brexit, amid growing uncertainty a deal can be struck in time.