Any binding Brexit transition agreement is unlikely before the first quarter of next year, too late to stop some banks in London from pressing the "relocate" button, a British financial services lobby group said on Tuesday.
Britain's financial sector is concerned that, with EU divorce talks bogged down by failure to agree the UK's exit bill, time is running out for a transition deal that would be of any use to businesses.
TheCityUK, which promotes Britain's financial services sector abroad, said the value of such a deal is disappearing by the day and agreement would be needed in the first quarter of next year for financial businesses to reap any benefit and avoid fragmenting markets.
"If they haven't done so already, most will be ready to press 'go' on their contingency plans in the New Year," said Miles Celic, chief executive of TheCityUK.
"They can still take their foot off the accelerator if a transitional deal is agreed, but without progress soon, it may be too late," Celic said.
Once businesses start moving, there is no reverse gear and the risk is that jobs and investment will head to Europe, he said. A transition period of at least two years -- the preferred option for Britain's banks -- should entail as close to full European market access as possible, he added.
EU leaders meet on Thursday and Friday to discuss Brexit and a draft communique showed they won't adopt guidelines on possible transitional arrangements until December.
Meanwhile, some pro-Brexit lawmakers have said that Britain should not be subject to European Court of Justice rulings and that no new EU rules should be implemented during any transitionperiod.
A UK financial industry official said there is no time to negotiate a bespoke transition deal to meet such demands.
"If you are going to be in the club, you can only have the set menu," he said.
The Bank of England has said that a transition deal is needed by Christmas, given the time it takes to approve new licences for the continuation of cross-border banking after Brexit in March 2019.
If a political deal on transition is agreed between the EU and Britain, regulators would also need to give banks assurances that they would respect it when it comes to assessing risks, TheCityUK said.
The Bank of England has said it would decide by year-end whether London branches of EU banks must become subsidiaries if there is no transition deal in sight. (Reuters)