UK banks are set to organize a plan to support businesses in case a trade agreement does not take place before the UK leaves the EU in March 2019.
UK Finance, the lobbying body for the big banks in the country, has confirmed that plans are in place to provide aid in the event of potential financial shocks and market uncertainty as the deadline for Britain to make an agreement with the European bloc gets ever closer. UK Finance has, in the past, stepped in for the collapse of both construction giant Carillion and Monarch Airlines.
Other contingency plans are already being prepared, with the army set to be on standby to deliver food, medicine and fuels where necessary.
Signaling the expected likelihood of severe financial disruption ahead, the move is significant in that it openly highlights the need to address the potential financial black holes that may emerge as the result of a no-deal Brexit.
The Telegraph reported over the weekend that CEOs and lobbying groups are prepared to roll out new credit lines to those who may need it. Those relying heavily on European imports and exports should be among the first to express their desire for assistance.
This could help release economic blockages and keep the economy flowing during what is set to be an unpredictable time. The Prudential Regulatory Authority (PRA), an arm of the Bank of England (BoE), is already liaising with lenders to see how much support they can provide and find the best areas to target to ensure as smooth a transition as possible.
The Sunday Times confirmed that the army is ready to deliver food, fuels and medical supplies should a deal not take place. These releases may be a deliberate attempt to both hurry along those at the negotiating table and indicate a readiness to walk away from unsatisfactory talks.
Theresa May, the UK Prime Minister, is hoping that she and her government can reach an agreement with the EU by October, but such a short window between then and the March 2019 exit date means that forthright planning needs to be in place ahead of time to stand a chance of the process running smoothly if talks remain unfruitful.
Those at the other end of the negotiating table, including the EU’s chief negotiator, Michael Barnier, have been critical of many aspects of the UK government’s strategy around Brexit so far. Barnier suggested that some parts of the proposals are incomprehensible to him at present.
One FTSE 100 source said that the banks stepping in to lend aid is “a bit Dunkirk-spirit type of stuff” but added that the banks are in a good enough shape with viable liquidity to make this move both possible and practical.
UK Finance CEO Stephen Jones confirmed to the Telegraph that the organization is happy and ready to step in and help where necessary. Efforts should focus on those businesses with supply chain delays. Manufacturing will also likely be a core priority to allow the economy to keep growing and reduce the risk of a post-Brexit economic slowdown.