Economy

Brexit deal with EU could take 10 years, warns UK ambassador

EU preparing rule changes that could deprive London of one of its flagship financial businesses

Ivan Rogers, Britain’s envoy to the EU, said the European consensus was that a deal might not be done until the 2020s. Prime minister Theresa May’s office said it did not recognise this view. Photograph: iStock

Thu Dec 15 2016 - 19:10

A post-Brexit trade deal between Britain and the EU might take 10 years to finalise and could still fail, the UK’s ambassador to the bloc has told UK prime minister Theresa May’s government, according to reports.

Ivan Rogers, Britain’s envoy to the EU, warned ministers that the European consensus was that a deal might not be done until the early to mid-2020s, and that national parliaments could ultimately reject it, the reports said.

Mrs May’s office said it did not recognise the views expressed by the diplomat, it was reported.

EU officials have long said that negotiating a trade deal with the bloc can take years, pointing to the fact that Canada started talks in 2009 for an agreement that has yet to enter force. However, British officials say they hope to reduce the amount of time to strike a deal, arguing that British regulations are in line with EU standards after decades of membership.

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Mrs May has said she will invoke article 50, the up to two-year divorce process for leaving the EU, by the end of March.

Transactions

Meanwhile, the EU is preparing rule changes that could deprive London of one of its flagship financial businesses by enabling territorial restrictions on the clearing of some euro-denominated transactions even before Britain leaves the bloc.

While the precise form of intervention is undecided, the European Commission is considering backing legal changes to give the European Central Bank a remit over the location of key market infrastructure.

The move is likely to be seen by the UK as a provocation, which fought hard for years to fend off French-led attempts to relocate euro-clearing to the single currency area.

French officials are pushing for restrictions on clearing to be included in legislative proposals scheduled for this spring – shortly after Britain says it will initiate the formal article 50 exit process.

Other euro zone and EU officials say a move to restrict euro-clearing outside the euro zone is likely before Britain’s expected withdrawal from the EU in 2019.

Flashpoint

Any such initiative would face considerable political and technical obstacles. However, the willingness of senior officials in Brussels and Paris to move early on territorial restrictions underlines how the issue is likely to become a flashpoint in Brexit talks.

Defending London’s cornerstone euro-clearing business has been a totemic issue for UK governments. London is the world’s biggest centre for clearing euro derivatives, handling three-quarters of all transactions, with an average daily value of $573 billion (€550bn), according to an Intercontinental Exchange (ICE) paper recently circulated to EU states.

– Reuters

/Financial Times

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