Bank of England governor Mark Carney is reportedly working on a plan to keep the UK in the single market for at least two years after Britain leaves the EU, thereby creating a buffer period to allow businesses to adapt to new life outside the bloc.
The Times reports that the governor has held a number of private meetings and dinners over the past two weeks, during which he apparently urged business leaders to put aside their differences over Brexit and focus on a common goal.
Carney is believed to have told businesses that whether or not Britain remains in the single market over the longer term, local businesses need time to adapt to the new arrangements post-Brexit.
He is urging businesses to push for a period of "continuity" – once Brexit negotiations conclude – to help them prepare for whatever deal the government strikes with the bloc.
Carney's proposal, also known as the Brexit buffer in the City, will provide the government with some flexibility in its Brexit negotiations without having to reveal its broader strategy and, at the same time, help cushion the financial sector and even the broader economy from post-Brexit turbulence.
The BoE governor, who is due to step down in June 2019, hosted two dinners — one on 21 November at Chatham House for about 50 senior investment bankers, and the second on 23 November for finance directors of high street banks.
A banker who attended the Chatham House event was quoted as saying : "Carney knows there needs to be a two-to-three-year extension to allow Britain to adjust from the old rules under Europe to the new order. His key word is continuity."
According to The Times, Carney is making similar appeals for a smooth transition through the G20's Financial Stability Board, according to senior bankers.
But the BoE is not the only bank that is concerned over the option of a hard Brexit. According to the newspaper, the European Central Bank is worried that London, being the EU's dominant financial centre, could choke off the flow of capital for companies in the bloc.
"The Germans want a handover period, too, but don't want to be seen asking for one," a source briefed on the talks told The Times. "Carney is offering a diplomatic solution that works for everyone."
The EU passporting rules, which allow banks based in the UK to sell their products in the EU, are likely to be one of the main bargaining chips in the talks.
A spokesman with the central bank declined to discuss "private meetings and conversations", the BBC reports.
Brexit supporters reject Carney's plans for a Brexit buffer
Meanwhile, Brexiteers have come out strongly against such a plan. Former cabinet minister Michael Gove told the BBC that a Brexit buffer would only complicate the process.
Speaking on the Andrew Marr Show, leading Brexit campaigner Gove said: "I'm open to the case for a transitional agreement but I'm not convinced we need one. Again, there is a tendency to over-complicate this process."
He added that his worry was that "there are some people who can't get over the fact that the British people have voted to leave the EU and want us to have a transitional arrangement which is as close as possible to EU membership" as a way of avoiding Brexit.