Business as usual – at least for a little while. That’s the message from Theresa May’s draft withdrawal plan, but the banking sector don’t seem to be popping the champagne just yet. And if you want to see why even a permanent deal on access to banking services could be problematic, you only have to cast your eyes over to Switzerland.

As Reuters reported, news that the draft withdrawal agreement would include a business as usual transition period received a relatively luke warm reception from banking official. Plans to continue opening hubs in the EU, said officials, were likely to continue mainly because the plans were yet to be ratified.

As of writing, getting it through parliament could be difficult, but the situation appears to be so fluid it could all change by the time I finish writing it. Even so, the Brexit Secretary has already resigned, there’s talk of a vote of no confidence, Labour, the Lib Dems, the SNP and even the DUP are all against it and there are plenty inside her party on both sides of the debate who may not vote for it.

She will be relying on everyone to exercise a little bit of pragmatism. For her leavers this may not be the Brexit they hoped for, but it at least is a Brexit and staves of the prospect of a second referendum. Remainers, meanwhile, may decide that voting for this deal – like it or not – is better than the chaos of a full on no deal Brexit.

So, lets assume things go well and she does get this deal – or something like it – through parliament. Then, further down the line, we do negotiate a favourable deal that allows the banking sector to carry on as if nothing has happened. All will be well right?

Well, not necessarily. A key part of any deal will be whether or not the city can secure what’s recognised as equivalence – namely the idea that banks will be allowed to continue trading in the EU, as before. For that to happen the EU must feel the regulatory environment here in the UK is broadly aligned with the EU.
There’s a lot going in our favour. As things stand the UK financial regulatory system is very much along the same lines as the EU and is one of the most respected in the world. Getting a deal on equivalence should be a piece of cake shouldn’t it?

Well, not so quickly. The decision is supposed to be technical, but that is not always the case as the Swiss are currently finding out. Last year they were granted equivalence, but only for 12 months. That time is coming to an end, but the EU is dragging its feet on renewing the terms. The problem? Politics.
The Swiss and the EU are locked in difficult negotiations about renewing their commitment with the normally pro EU Swiss Labour party joining the anti-EU opposition in opposing a deal which they say could put Swiss wages at risk. The EU says it does not want to continue negotiating equivalence until that deal is done.

So, although nothing technically has changed, politics is standing in the way and the same could be true of the UK. Equivalence is never a done deal – it can be withdrawn at any time and as their negotiations with the Swiss prove the EU is not above using it as a political tool.

While the regulatory environment in the UK is closely aligned with the EU at the moment, that might not necessarily be the case forever. Governments can change and may bring their own approaches. Could reforms suggested by the Labour party or proposed tax cuts from some with the Conservatives provoke the EU to take action?

So, even with a bit of certainty that the deal brings, there is still plenty of uncertainty – which is of course what makes Brexit so fun and fascinating for all concerned. In short, the financial sector will still feel tempted to at least hedge their bets whatever happens.