Trade body issues warning over consequences of a no-deal Brexit

PIMFA says such an outcome would be "disruptive and expensive" for its members, as any increase in costs or reduction in investment possibilities would be passed on to the clients of its firms.

The trade body says that in order to avoid this consequence, a no-deal Brexit must be avoided and that a broad-ranging and well-founded UK/EU agreement based on the principles of mutual recognition should be in place by the end of a transition period.

PIMFA says that currently, the draft Withdrawal Agreement would make this possible as it advocates a transition period until 31 December 2020, effectively meaning no changes to business models will be needed until then.

During those 21 months, PIMFA remains hopeful that the government and EU partners can negotiate the final form of the UK/EU agreement to operate from 1 January 2021 onwards.

PIMFA concluded: "It is therefore vital that the Withdrawal Agreement is not jeopardised in the current focus on the key principles of phase 3. Without a proper phase 2 and smooth transition, phase 3 itself could become disorderly and highly disruptive to business. This will adversely affect employment, growth, costs, tax revenues and investment [and] lead to a no-deal Brexit that would be damaging across the board for EU members, including to all PIMFA members and their retail clients."

John Barrass, PIMFA Deputy CEO, said: "At present, focus is on the application of ‘enhanced equivalence' rather than mutual recognition, but equivalence does not apply to dealing with clients in the retail investment sector so, unless the final delineation of enhanced equivalence changes this, there will be no effect on the position of PIMFA firms.

"PIMFA has repeatedly made it clear that an orderly, 3-phase approach to Brexit is both essential and achievable. This necessitates securing consensus around a Withdrawal Agreement in phase 1 to include a transition period as the core of phase 2 in which the final agreement for phase 3 is negotiated and agreed. The aim is to secure a one-step Brexit at the point of implementing phase 3, which firms can be aware of and plan for well ahead of time. This would minimise disruption and the costs of changing to business patterns suitable for a non-EU state".