A leaked U.K. government report that predicts disruption to financial services if the country leaves the EU without a deal on the terms of its departure has been endorsed by business leaders.
The report, entitled Operation Yellowhammer and published in The Sunday Times on Aug. 18, outlined the government’s assessment of the effects of a "no deal" departure, including possible food and medicines shortages. The U.K. is scheduled to leave the bloc on Oct. 31 and the government has said it will leave with no deal unless the EU makes concessions.
The document said there would be disruption to some U.K. financial services while a "small minority" of insurance payments from U.K. insurers into the EU may be delayed. It also said bigger companies were better prepared for "no deal" than smaller ones.
Michael Gove, the minister in charge of no deal preparations, said the document represented the "very, very worst situation" and was out of date, though it was subsequently reported that the report was produced on Aug. 1. Gove also admitted there would be "bumps in the road, some element of disruption" in the event of no deal.
Clear information needed
However, Edwin Morgan, interim director general of the Institute of Directors, said firms needed clear information from the government on plans to cope with a "no deal" scenario.
"The message from the government has become clearer, and firms are taking 'no deal' much more seriously, but it is still isn't clear enough exactly what companies need to be preparing for," he said. "We've had a leak which we're told is out of date, but no official statement of the current planning assumptions."
Banking and financial services have been preparing for the U.K.'s departure from the EU, when banks may lose their "passporting" rights, which allow EU banks to offer services across the bloc.
U.K. Finance, which represents the British financial services industry, said banks were as prepared as they could be in the circumstances, but said the EU could take further steps to mitigate the effects of "no deal" disruption.
"This should include clarifying that U.K.-based lenders will be able to continue serving their customers in Europe for a limited period in a 'no deal' scenario," said a U.K. Finance spokesman.
Financial services lobbying group TheCityUK also criticized regulators' preparedness for a hard Brexit.
"While 'no deal' remains to worst outcome from our industry's perspective, businesses have done everything they can to make sure they can continue to serve customers and clients. Regulators on both sides have also prepared contingencies, although many of these are time limited, and on the EU side, patchy, as there is often not a consistent EU-wide approach," said a spokesman.
Insurers seek assurance
The insurance industry also said it had done all it could to prepare for a "no deal."
"As an industry we have done everything possible to prepare for "no deal," including transferring an estimated 29 million insurance contracts and the establishment of nearly 40 EU subsidiaries and branches to minimize disruption to customers," said a spokesman for the Association of British Insurers.
But, he said, there are some consequences the industry cannot overcome itself and the government must do everything it can to avoid a "no deal" scenario given the disruption it would cause to customers.
The leaked document also pointed out that the EU had not made a decision on rules regarding data transfer to the U.K. It said this will disrupt the flow of personal data from the EU and it warned that in a "no deal" Brexit, plans for EU data to be transferred to the U.K. could take years to come to fruition.
