The Treasury has outlined its financial services legislation plans in the event of a ‘no deal’ Brexit although it believes a transitionary deal until December 2020 will still happen.

The Treasury is working on detailed financial services legislation to enact the EU (Withdrawal) Act 2018, whatever the outcome of final Brexit negotiations.

Civil servants are busy preparing secondary legislation, including draft statutory instruments, to ensure the UK has “a functioning legal framework for financial services by March 2019” for the post Brexit era.

The UK will exit membership of the EU at the end of March 2019 with transitionary arrangements planned to be in place until December 2020 when EU rules will still apply to financial services.

The proposals include steps to cope with a so-called ‘no deal’ Brexit and details of how financial services legislation will continue to function post Brexit.

The Treasury said: “This collection sets out how HM Treasury is using powers, under the EU Withdrawal Act, to ensure that the UK will have a functioning financial services regulatory regime by March 2019, regardless of progress in EU Withdrawal negotiations.

“This work involves using statutory instruments (SIs) to fix deficiencies in retained EU law, so that it is operable in a UK context – these SIs are not intended to make policy changes, other than those necessary to reflect the UK’s new position outside the EU, and to smooth the transition to this situation.”

The paper says that the government believes there will likely be transition arrangements in place post March but if a ‘cliff edge’ happens it is ready.

The approach paper says: “The government is confident that the implementation period, agreed between the UK and the EU earlier this year, will be in place between 29 March 2019 and 31 December 2020. Nevertheless, the government will ensure that a workable legal regime is in operation whatever the outcome of negotiations.”

The Treasury plans to legislate to give the FCA potential additional powers to make extra transition arrangements if a ‘no deal’ Brexit happens to ensure financial stability is maintained.

The government department will be publishing details of its EU Withdrawal Statutory Instruments shortly to provide more detail of the transitionary arrangements.

The Treasury has also published a Statutory Instrument outlining the Temporary Permissions Regime for firms

• Approach to financial services legislation under the EU (Withdrawal) Act 2018