Martin Flanagan: ‘Brexit buffer’ for banks might face a rough ride

Prime Minister Theresa May said in October that the UK was not leaving only to return to the jurisdiction of the ECJ (European Court of Justice). Picture: PA
Prime Minister Theresa May said in October that the UK was not leaving only to return to the jurisdiction of the ECJ (European Court of Justice). Picture: PA
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British banks are said to be lobbying privately for a five-year buffer during which they could stay under European laws after the UK pulls out of the EU.

This would almost certainly enrage the Brexit camp, who want to break away from the trading bloc’s legal system headed by the European Court of Justice as soon as possible. The Brexiteers are basically against transitional deals as they seek a clean break with the EU in order to curb immigration and pull free from the legal overlordship of Europe. Prime Minister Theresa May said in October that “we are not leaving only to return to the jurisdiction of the ECJ (European Court of Justice)”.

A document outlining the case for a Brexit buffer for Britain’s banks is understood to have been submitted to the Treasury on their behalf by three of the City’s biggest legal firms – Linklaters, Clifford Chance and Freshfields. It is by no means certain that the Prime Minister would countenance it, however. The banking industry is still under a cloud with many of the public for its part via the sub-prime lending implosion in triggering the 2008/09 recession and “lost decade” of wage growth.

The industry’s stock is not high. The UK’s financial institutions trade on the Continent under EU passporting rules. But the idea that they could cut a separate deal in the negotiations with the EU would go against the grain with many Brexit voters.

Financial services is important to Britain, accounting for 10 per cent of both UK GDP and tax paid here, but the wave of populism currently afoot shows that voters are not just voting on the criterion of economic health, but addressing wider concerns. A Brexit buffer for the banking industry would surely risk falling into that category.We’re loving it

It is said that fast food giant McDonald’s decision to move its non-US tax base to Britain and away from Luxembourg could benefit our tax coffers by many tens of millions of pounds, possibly even hundreds of millions. That’s good news and the latest example of major US corporates tidying up their European tax acts, following on from Amazon, Facebook and Starbucks. The European authorities have got increasingly militant and that may have played a part in McDonald’s thinking as well.