With the political debate both within the UK and outside raging, there have been a few developments of note to the energy and commodities markets since our last post here.
Most recently, Jeremy Corbyn, leader of the opposition Labour party , made a speech yesterday (see here) stating the party’s Brexit position. Within the speech, indications were made that Labour would seek to keep the UK within the Internal Energy Market, as reported here on the Utility Week web site.
The UK government is due to set out its position at the end of this week.
This article on the Reuters web site reports on concerns in the markets of continued uncertainty as to the mode of departure, which according to the article may continue even if a transition deal is agreed, whose details may not be known until October. This is already leading to many making contingency plans that involve moving staff out of the UK. The article goes on to discuss the fact that those who wish to become authorised by an EU 27 National Competent Authority should make such applications soon. So far few applications have been received.
There is also mention of the those already assuming a “cliff edge” scenario. This statement from the European Commission last week highlights the legal effect of such a scenario, which occurs in the absence of any agreement. it highlights the fact that under such a scenario, those authorised to provide financial services in the UK will no longer be “passported” to provide such services in the EU.
Some are hoping that negotiations to a different scenario would lead to the passport remaining, However, according to this article on the Bloomberg web site, such a scenario is increasingly unlikely. Instead, “equivalence” may be the outcome. Equivalence provides various mechanisms so that different regulatory regimes recognise certain portions of the other’s rules, permitting for example Regulated Markets in third countries to be recognised and receive certain treatments under MiFID, EMIR and other rule sets.
The UK government is soon to make a speech outlining its vision for the future of financial services after brexit, as reported in this article on The Telegraph web site. There is hope that a “bespoke” deal, with “equivalence+” will be agreed.
Others are arguing that the UK should become a “low regulation economy” after Brexit. For example, this article by Steven Woolfe, an independent MEP who has stood for UKIP, views MiFID II as overly onerous for many, and sees Brexit as an opportunity to reduce its impact for UK firms.
Time to start planning
There are just over 13 months left until Brexit. There are several scenarios under which Brexit could occur, and they all involve changes to the existing rules such as REMIT, EMIR and MiFID II, no matter what the outcome. These will apply to UK companies, and anyone with a UK counterparty or trading on UK markets. It is advisable to start planning for these scenarios over the coming weeks, as time is running out to implement changes. There is a temptation to “wait for clarity”, before addressing any possible change programme. However, in this position of knowing an end date, but not the requirements, it becomes necessary to do as much as possible to prepare, in order not to run out of time.