What the actual effects of brexit will be are still mostly unknown. Theresa May is still trying to secure a good deal with the EU for the future; however, it’s unclear which option the UK will end up with and many businesses are warning that it could lead to an array of problems going forwards. Now, a report from the financial services industry body, TheCityUK, has warned that it could not only lead to major problems for the UK’s businesses, it could also leave millions of individuals in financial difficulty.
What are the UK’s biggest risks?
One of the biggest problems that could arise when the UK leaves the European Union next year is uncertainty over cross-border contracts. According to the research, numerous industries will be affected by this. One of the biggest is financial services, including insurance. Brexit could cause problems for around 36 million insurance policies, as well as affecting uncleared derivatives contracts, credit agreements and pensions.
The fact that the EU has already ruled out the idea of a separate free trade agreement for financial services means that British citizens who have taken out these products are facing massive uncertainty. Some contracts can’t be transferred, which could result in regulatory intervention or termination, both of which can be complicated and take a long time to complete.
Regulation could prove to be another major issue. Many European regulators could find themselves dealing with products and services they haven’t dealt with before. Going forward, TheCityUK say that the potential solutions to this, which would all involve cooperation from both sides are:
- A bilateral agreement being set up between the UK and the EU for trade
- Separate regulation/legislation in place
- Including it in the EU Withdrawal Agreement
A statement from TheCityUK says:
“The smooth operation of financial markets and the continued ability to service customers and clients is the foremost priority for providers across Europe. It is in the mutual interest of the UK and the EU, and most importantly, customers on both side of the Channel, that urgent agreement is struck on the ability of these contracts to be grandfathered, either for a defined period or potentially until maturity.”
“Technical issues, such as contract continuity, can most effectively be addressed separately from the political negotiations. Without a viable solution, millions of people could be left without a safety net. This must not be sucked into the Brexit negotiations. It is a non-political, technical issue and needs a non-political, technical solution. Continuing to be able to serve customers and clients is the industry’s number one priority. While firms are doing everything they can, this is not a problem that businesses can fix alone and requires a coordinated UK/EU approach. Without it, people and businesses across Europe could be left dangling over a cliff edge following Brexit.”
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