London — Britons living in the EU could lose access to their UK bank accounts and businesses on the continent might be cut off from investment banks in London if there was a no-deal Brexit, the British government said on Thursday.
In a document detailing contingency plans in the event of Britain leaving the EU in March with no transition deal, the government said unilateral action on several fronts could minimise disruption only up to a point. More than a million Britons living abroad might not be able to access their UK bank accounts to receive pensions and salaries.
All Britons would face higher costs to make card payments in the EU when travelling abroad.
The EU agreed this year to cap the fees retailers pay to process debit-and credit-card transactions. Without a deal between London and Brussels, the ban on cross-border surcharges would no longer apply. Britons living in the EU "may lose the ability to access lending and deposit services, insurance contracts", the document said.
"The cost of card payments between the UK and EU will likely increase, and these cross-border payments will no longer be covered by the surcharging ban." The government said it was committed to giving regulators such as the Bank of England and Financial Conduct Authority a "general transitional tool" to phase in changes to ease the effect in the event of no agreement. But the EU would also need to take action to avoid disruption in cross-border financial services, it said.
"The UK is a major centre for investment banking in Europe. In the absence of EU action, European Economic Area clients will no longer be able to use the services of UK-based investment banks."
Brussels has said it is primarily up to banks and insurers to prepare for Brexit, such as by opening new hubs in the bloc.
Miles Celic, CEO of TheCityUK, which promotes the financial sector, said financial firms were focused on continuing to serve customers, whatever the outcome of Brexit talks.
Banks, insurers and fund managers in the City of London financial district now have unfettered access to the EU, the sector’s biggest export market, under the bloc’s "passporting" rules. Counterparts in the bloc have similar access to Britain.
This cross-border network would be disrupted without a transition deal next March, leaving customers in the lurch.
"Leaving the EU without a deal would cause major inconvenience to millions of pensioners, travellers and drivers," said Hugh Savill, director of regulation at the Association of British Insurers. Since Britons voted in 2016 to leave the bloc, financial centres such as Paris, Frankfurt, Dublin and Luxembourg have been vying for a slice of London’s business.
The document said there was a need for the EU to reciprocate British action to ensure continuity in cross-border insurance policies, derivatives contracts, and core market services for companies and people.
"Neither the industry nor the UK can fix this alone. This is a practical issue that impacts customers and clients. It is time for EU authorities to tackle it in that spirit," Celic said.
The document said that without EU action businesses across the bloc could no longer use investment banks in Britain.
Brussels, for example, would need to give investors in the EU permission to continue using a share-trading platform. "If no action is taken by the EU authorities and EU countries, EU securities may no longer be able to be directly settled in the UK," the document said.