Large international banks in Britain are pleading to remain subject to European Union laws for up to five years after Brexit.
In a submission to the Treasury, drafted by three of the UK’s biggest law firms, the finance giants ask to stay under the jurisdiction of the European Court of Justice as part of a transition period.
The latest twist is another headache for Theresa May’s Government as it works to trigger Article 50 of the Lisbon Treaty by March next year, which would begin a two-year countdown to the UK’s departure from the EU.
“The report has been received as a fairly serious piece of work,” one banker at a large international firm told news agency Reuters.
“It focuses on the legal underpinning of a transitional arrangement. It’s a heavyweight legal piece of work.”
The document warns of the potential shock to the British and European economies if the transition period is limited to just two years after Article 50 is invoked.
According to Reuters, some Treasury officials support the proposal, but Ms May and Secretary of State for Exiting the European Union, David Davis, have not committed to it publicly.
The Treasury has said that Chancellor Philip Hammond is listening closely to the financial sector’s views.
If a deal is not struck, the submission says there is a risk that some banks will have to freeze some of their EU business operations, because they will not have sufficient time to rearrange their operations and set up subsidiaries on the Continent.
It normally takes banks as long as three years to relocate, and regulators will be flooded with requests during Brexit, the document warns.
“This is important in order to avoid potential damage to the ‘real economy’ that is reliant upon uninterrupted access to financial services,” it adds.
A number of banks are in “advanced talks” over a mass move to Paris, according to a French regulator.
Richard Tice, co-chairman of the Leave Means Leave campaign, which is backing a ‘hard Brexit’, claimed the banks were exaggerating.
“This is nonsense. It is just the banks, frankly, not dealing with the issue,” said property developer Mr Tice, who co-founded the Leave.EU campaign with Ukip donar Arron Banks.
“The country voted for change and the sooner they wake up and accept it the better.”
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The paper was drawn up by law firms Linklaters, Freshfields and Clifford Chance, and was described as “technical support to those developing a negotiating position for the UK”. All the law firms declined to comment to Reuters.
Finance accounts for around 10 per cent of Britain’s GDP, compared to about four per cent in Germany.
The document suggests the European Court of Justice, detested by British eurosceptics, should settle any disputes during the transition.
“We well understand the political sensitivity to that proposition,” it adds.
The Supreme Court, which has retired to consider whether Theresa May has the power to trigger Article 50 herself or whether she needs parliament’s approval, heard a “six-year-old child” could see the flaws in the Government’s plan.
A 55-year-old man has been arrested on suspicion of threatening Gina Miller, the businesswoman spearheading the legal challenge, online.