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* Brexit back on agenda after COVID-19 hiatus
* Banks have no plans to lobby for transition extension
* Equivalence assessments due by end-June
* Calls for Britain to grant EU firms access regardless
By Huw Jones and Sinead Cruise
LONDON, April 30 (Reuters) - Banks are dusting off their
no-deal Brexit plans as concerns deepen that Britain and the
European Union won't agree a trade deal by December as the
COVID-19 pandemic compounds fundamental disagreements over
future relations.
Financial services exports to the EU are worth about 26
billion pounds ($32.51 billion) a year, and although Britain
left the bloc in January it still has unfettered access until
the end of December under a transition agreement, allowing
banks, asset managers and insurers to continue serving their
biggest export market.
But that leaves the UK with just a few months to negotiate a
trade deal with the EU that would come into effect in January to
avoid a "cliff-edge" in business activity. If it wants an
extension to the transition period, it must ask Brussels by the
end of June.
"Brexit is firmly back up the agenda, people are talking
about it and are very conscious of the very short time to get
any deal agreed," said Catherine McGuinness, political leader of
the City of London financial district, adding that financial
industry groups met in recent days to discuss preparations.
"I don't think anybody is expecting a transition extension
at the moment, but the timetable is very tight. We are dusting
down our papers on the various solutions to the cliff-edge
problems."
Despite fundamental disagreements in the talks and political
focus shifting to the pandemic, British Prime Minister Boris
Johnson has insisted he won't request an extension.
"Brexit has not gone away. It's full steam ahead. The trade
negotiations are not going smoothly and we have to assume some
chance of an exit without a deal," a source at a major global
bank said.
The government's firm no-extension stance has killed off
lobbying efforts by the financial industry, the source added.
Miles Celic, chief executive of TheCityUK, which promotes
Britain as a financial centre, said the government had to be
taken at "face value", and bankers said the sector would not ask
for an extension.
"People are looking at no deal preparedness again," said
Rachel Kent, a financial services partner at Hogan Lovells law
firm who was present at the industry talks on Brexit.
Banks are largely reviving plans they had when a no-deal
Brexit loomed several times in 2019 before Britain and the EU
signed off on a divorce settlement and transition period.
Under the plans banks would move more staff and activities
to their new EU hubs to serve customers inside the bloc rather
than from Britain.
A source at a second major global bank said that although
the coronavirus pandemic had eclipsed Brexit for now, its
no-deal plans were still at hand.
"All the plans are there, it's not like they didn't exist,"
the source said.
JUNE MILESTONE
The source at the first major global bank said everybody was
aware that financial market access under the EU's patchy
"equivalence" system was the best the sector could expect.
Brussels grants direct financial market access if it deems a
foreign country's regulations are in line with its own. The EU
has said it would look to complete its assessment of UK
equivalence also by the end of June.
"June is a key time politically and the key priority is
those equivalence assessments being in place sufficiently in
advance of the end of the transition period," a European banking
industry official said.
Obtaining equivalence is critical for clearing houses in
London to avoid them having to tell EU clients in September to
move positions worth billions of euros out of Britain by the end
of the year.
"Although we would love to see progress by June, I am not
holding my breath because, let's deal with COVID first," the
City of London's McGuinness said.
There is already talk that Britain may prefer not to have a
trade deal to avoid having its hands tied while supporting an
economy thrown into deep recession by the pandemic, Hogan
Lovells' Kent said.
"There is a feeling that can best be done without the
constraint of being in the EU with issues like state aid and the
need to have consent before supportive measures can be taken."
Britain also has to decide whether to grant equivalence type
access to EU financial firms that want to serve UK customers.
Bankers and McGuinness said Britain should go ahead and
grant such access regardless of what the bloc decides on
financial market access for Britain in coming months.
"We should be an open trading nation, we always have been
and ought to remain so. It would be cutting our own nose to
spite our faces if we keep people out," McGuinness said.
($1 = 0.7997 pounds)
(Reporting by Huw Jones and Sinead Cruise, editing by Kirsten
Donovan)
