Despite the summer being quiet, the news headlines still continue to be full of material on Brexit, for example this news story on the Sky News web site about EU chief negotiator Michel Barnier not being in favour of the “Chequers” proposal from July (see here). There are also reports that the previously set deadline for concluding Brexit talks of October will move to November, as described here on the Bloomberg web site. As a result, there have been a few developments since our last post here.
The UK Government has made this announcement on the release of a series of technical notes on the impact of a “no deal Brexit” . The first tranche includes this note on the impact on financial services. It includes the impact from a CCP perspective, from both a UK and non UK perspective. It also states that there could be issues in EEA firms accessing UK venues, which will likely have an impact on EU 27 firms trading energy and commodity derivatives on UK financial venues. It also alludes to possible difficulties for UK firms in accessing some EU venues.
Bafin, Germany’s National Competent Authority (financial regulator) have announced that they too are preparing for a no deal Brexit, as reported here on the Reuters web site. They report the receipt of over 25 financial authorisation applications from investment firms wishing to move to the German jurisdiction.
On the energy side of things, this article on the Montel web site reports that TSOs are making “no deal” preparations for Brexit, in particular with respect to inter connectors. The concern is that the UK will no longer be eligible for market coupling, thus adversely affecting inter connector use. This could have an impact on the desire to invest in new inter-connector capacity.
This article on the Utility Week web site reports about a paper written by E3G which highlights the reduction in investment in clean energy schemes, which is partly but not wholly attributed to the uncertainty around Brexit. The report, which can be found here, urges the UK Government to replace the funding.
This article on the FT web site reports that an element of “risk premium” is now being priced into supply contracts that span the Brexit date and also the possible end to the transitional period at the end of 2020, should it be agreed. It also discusses the issue of the possible departure of the UK from the Emissions Trading Scheme, and suggests that it would be difficult to create a local version within a short space of time.
With just over 6 months to go until the Brexit date, the prospect of a “no deal” Brexit must be treated as a reality, until such time as an agreement is signed. This means that solid preparations should be made on a contingency basis. There will come a point where these plans must be enacted to avoid the possibility of running out of time.