The government is giving out dangerous mixed messages on the transition period that business and finance in the UK are desperately and urgently seeking. On the one hand Mr May is apparently reassuring business privately that a transition period is "assured" (HERE) and then openly telling parliament that the transition will not be agreed until the trade deal is settled, which no one believes can be done before March 2019.
It is as if the government doesn't understand the problem. Business cannot handle a cliff edge at all. No one involved in cross border trade with the EU can afford to wait until a trade deal is agreed before they know the legal basis for the transactions. We are out of the EU in April 2019 without any arrangements in place for about 60% of our trade.
Business is becoming alarmed that basic details of any transitional arrangements will not be clear by Christmas, with The City (HERE) warning that time is running out and demanding an agreement on transition is agreed before the end of the year. Since many of the businesses will relocate into other European countries it is difficult to see why the EU should make any special effort to reach any kind of deal with us urgently. They will be the beneficiaries of the uncertainty. Pressure must be mounting on the government but they all seem unbelievably complacent, especially David Davis.
The head of the German financial regulator has told an audience of London businessmen (HERE) that they have limited capacity and will deal with applications from financial organisations that wish to relocate to Frankfurt on a first come, first served basis.
To add to the uncertainty, Michel Barnier, in an interview with a German newspaper, said Britain must accept the full economic and legal status quo in any transition period after it leaves the EU and should expect no tailor-made terms on trade in its future relationship (HERE). This is understandable since it should be the quickest way to a deal but even so, Barnier thinks it will take until 2020 to agree.
This rather scuppers the prime ministers suggestion of a "deep and special relationship" going further than the Canadian CETA deal and involving a highly bespoke arrangement. I assume the next step will be for us to refuse more money followed by the EU refusing a transition period. We are then firmly in no deal territory and pure chaos.
