Brits living in the European Union just may lose access to their United Kingdom bank accounts and businesses on the continent could be cut off from investment banks in London. This is if there is a no-deal Brexit, the British government said on Thursday.
In a document detailing contingency planning if Britain leaves the EU in March with no transition deal, the government said unilateral action on several fronts could only minimize disruption up to a point.
Over a million Britons living abroad may not be able to access their UK bank accounts to receive pensions and salaries, the document said.
All Britons will face higher costs to make card payments in the EU when travelling abroad.
The EU this year agreed to cap the fees retailers pay to process debit and credit card transactions. Without a deal between London and Brussels, the ban on cross-border surcharges would no longer apply.
Britons living in the EU “may lose the ability to access lending and deposit services, insurance contracts,” the document said. “The cost of card payments between the UK and EU will likely increase, and these cross-border payments will no longer be covered by the surcharging ban.”
The government said it was committed to giving regulators like the Bank of England and the Financial Conduct Authority a “general transitional tool” to phase in changes to ease the impact if no deal is agreed.
However, the EU would also need to take action to avoid disruption in cross-border financial services, it said.
“The UK is a major center for investment banking in Europe,” the document said. “In the absence of EU action, European Economic Area clients will no longer be able to use the services of UK-based investment banks.”
Brussels has said it is primarily up to banks and insurers themselves to prepare for Brexit, such as by opening new hubs in the bloc.
Miles Celic, chief executive of TheCityUK, which promotes the financial sector, said financial firms are focused on continuing to serve customers, whatever the outcome of Brexit talks.
Currently banks, insurers and fund managers in the City of London financial district have unfettered access to the EU, the sector’s biggest export market, under the bloc’s “passporting” rules.
Counterparts in the bloc have similar access to Britain and this cross-border network would be disrupted without a transition deal next March, leaving customers in the lurch.
“Leaving the EU without a deal would cause major inconvenience to millions of pensioners, travelers and drivers,” said Hugh Savill, director of regulation at the Association of British Insurers.
Since Britain voted in 2016 to leave the bloc, financial centres like Paris, Frankfurt, Dublin and Luxembourg have been vying for a slice of the City’s business.
Photo Credit: Reuters