London – The impasse over a Brexit transitional deal could cost Britain up to 75,000 financial services jobs as companies are forced to implement contingency plans, an industry group has warned.
Imminent contingency plans
The direct impact would cost the financial services sector up to 20 billion pounds (26 billion dollars) in revenue and 35,000 jobs if negotiations continue to stall and Britain leaves the European Union in March 2019 with no transitional deal, according to research for TheCityUK, which represents financial services firms.
“Taking into account the potential ecosystem impact, the numbers could be as high as 75,000 jobs and 8 billion-10 billion pounds in tax revenues,” it said in a report.
Because companies must soon begin to implement contingency plans, the impact of any agreement for Britain to retain equivalent access to the EU single market “could be minimal unless transitional arrangements are urgently clarified.”
“Once contingency plans have been implemented, they are unlikely to be unwound: the additional costs of moving business and jobs back to the UK would simply be too high,” the report warned.
“EU and UK negotiators cannot delay discussing a transitional deal any longer if they want it to hold any real value,” said Miles Celic, TheCityUK’s chief executive.
“No reverse gear”
“Firms are beyond the planning stage now,” Celic said.
“They can still take their foot off the accelerator if a transitional deal is agreed, but without progress soon, it may be too late.
“Once businesses start moving, there is no reverse gear,” he said.
After talks over dinner on Monday, British Prime Minister Theresa May and European Commission President Jean-Claude Juncker agreed that the Brexit negotiations should “accelerate over the months to come.”
But critics said May’s diplomatic flurry this week, including telephone calls to her German, French and Irish counterparts, had failed to break the impasse.
In another warning on Tuesday, a report by the Organization for Economic Co-operation and Development said Britain’s long-term economic progress will hinge on the outcome of the Brexit talks and future trade negotiations with non-EU countries.
UK needs EU
“The United Kingdom is facing challenging times, with Brexit creating serious economic uncertainties that could stifle growth for years to come,” OECD Secretary-General Angel Gurria said.
“Maintaining the closest economic relationship with the European Union will be absolutely key, for the trade of goods and services as well as the movement of labour,” Gurria said.
Britain’s monthly consumer-price inflation rose to 3 per cent in September, the government said on Tuesday, hitting a five-year high that some analysts saw as a sign of weakening economic growth.
The rise in inflation “mostly reflects increasing prices for food and recreational goods, along with transport costs,” amid the effects of a fall in the British pound since last year’s Brexit referendum, said Suren Thiru, chief economist for the British Chambers of Commerce.
Before the referendum, the OECD forecast that Brexit would cost each household up to 5,000 pounds annually and cause a fall in gross domestic product.