The European Union and the United Kingdom have agreed on a Brexit extension until January 31st, 2020.
Hubertus Väth, Managing Director of the Financial Centre initiative Frankfurt Main Finance, says:
“Frankfurt Main Finance welcomes the European Union’s decision to agree to an extension of the United Kingdom’s withdrawal from the EU. The chances of an unregulated Brexit to occur are now considerably reduced after the approval of the current agreement. We understand this to be a victory of reason.”
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“Frankfurt Main Finance welcomes the agreement reached between the European Union and the United Kingdom. This forms a basis for limiting the economic damage that could be caused by the withdrawal, creates clarity and reduces associated risks. At today’s annual meeting of the IMF and the World Bank, there is a palpable sense of relief in Washington amongst the banks who’ve long hoped for an agreement.
The compromise demonstrates that diplomacy between Brussels and London is intact, despite the intense arguments concerning an agreement over the past weeks and months. However, it remains to be seen whether the current agreement can be implemented.
The question of the backstop makes it clear that pragmatic solutions in the interests of both sides can be reached. This gives reasons to hope that that yet another victory in the negotiations can be reached in the near the future.”
Hubertus Väth, Managing Director of Frankfurt Main Finance
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The new UK government under Prime Minister Boris Johnson is preparing to leave the EU on 31 October, with no agreement in place. Now the majority of the German financial industry is also expecting a “no-deal” Brexit. This was shown in a recent survey by the Center for Financial Studies. Of those surveyed, 55% consider a disorderly Brexit to be probable, and 31% even see it as very probable. Only 11% are more optimistic in this regard.
The majority of respondents (63%) believe the German financial sector is sufficiently prepared for a “no-deal” Brexit, while 36% see a need for further measures.
“Considering how likely a ‘no deal’ Brexit has become, the survey results are rather worrying, as there is little time left for market participants to make adjustments,” Professor Volker Brühl, Managing Director of the Center for Financial Studies, interprets the survey results.
The EU has ruled out any renegotiation of the Brexit deal and should not offer any further compromises in the hope of avoiding a “no-deal” Brexit. This opinion is held by the majority (70%) of the German financial sector. Nonetheless, the respondents also agree (61%) that the financial markets have not yet fully anticipated a “no-deal” Brexit scenario and that market distortions may therefore occur.
“The survey indicates that the financial industry is prepared to accept the potential drawbacks of a ‘no deal’ Brexit if it means finally obtaining clarity about future framework conditions,” Professor Brühl adds.
There is also a broad consensus among respondents (88%) that if the UK leaves the EU in a disorderly fashion, more business activities and employees will be relocated to continental Europe.
Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., highlights: “Should there be a Hard Brexit, which the majority of respondents assumes is the most likely scenario, it will be important for the Financial Centres in continental Europe to demonstrate their efficiency. If we succeed in cooperating across borders, Europe could emerge from the crisis even stronger.”
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