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Economy 'needs orderly EU exit'

By Ravender Sembhy

The outlook for Britain's financial stability following the Brexit vote "remains challenging" and is dependent on an orderly exit from the European Union, the Bank of England has said.

In its Financial Stability Report the Bank indicated that as a result of the June 23 vote, the risk to financial stability "remains elevated".

The report said: "It will take time to clarify the UK's new relationships with the European Union and the rest of the world as well as for the UK economy to adjust to these changes.

"The orderliness of the adjustment will influence the risk to financial stability."

Bank governor Mark Carney said clarity on the details of Brexit would help an orderly transition and that it was important businesses knew "as much as possible, as early as possible".

He also dubbed the UK the "investment banker for Europe", adding that it is in the EU's interests that Brexit damage to Britain's banking sector is minimal.

"These activities are crucial for firms in the European Union economy, and it's absolutely in the interest of the European Union that there is an orderly transition and that there's continual access to those services," he said.

His comments come as the financial services sector frets over whether it will continue to have access to the bank passporting system. Banks and financial firms wanting to trade with a country in the European Economic Area (EEA) must apply for a passport, which allows them to sell their products to any country within the EEA.

The report added: "Changes to the trading relationship between the United Kingdom and the European Union may require firms to alter their operations and the services they provide.

"If any such adjustments take place in a short timeframe, there could be a greater risk of disruption to services provided to the European real economy, which could spill back to the UK economy through trade and financial linkages."

The report also said Donald Trump's US election victory earlier this month had "reinforced existing vulnerabilities," and flagged the potential for weaker global trade.

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