Britain's finance industry warns of threat from Brexit law changes

LONDON (Reuters) - Britain’s finance industry will warn the government next week to limit ministers’ powers to change legislation when it begins the mammoth task of converting European Union laws into domestic legislation in preparation for its exit from the bloc, according to a draft report seen by Reuters.

A tourist boat travels along the River Thames in front of St Paul's Cathedral and the City of London financial district in central London, Britain, May 7, 2017. REUTERS/Hannah McKay

The government will introduce legislation to incorporate EU laws into the domestic statute book from the day Britain leaves the union, which is expected to be in 2019.

This has been described as Britain’s biggest ever legislative challenge because it must convert more than 12,000 EU regulations into British law -- a step seen as necessary to ensure continuity for businesses trading across EU borders.

Though some British politicians and business leaders voted to leave the EU to reform or abolish some EU laws, a report by law firm Linklaters for a group funded by TheCityUK, Britain’s most powerful financial lobby group, warns the government against making changes when transferring them into domestic law.

READ MORE: Forget euro zone breakup, sterling now deemed riskier

The report says that an attempt to complete the exercise in less than the two years before Britain is scheduled to leave the EU could be “an overwhelming task” and create gaps in the law, undermining legal stability.

The government is considering a line-by-line approach to amending the laws, which would leave businesses and lawyers struggling to track the number of changes, the report says.

“Given the scale of the task ... we urge government to refrain from using this exercise to make policy changes, except where necessary as a direct consequence of Brexit,” the copy of the report reviewed by Reuters says.

TheCityUK declined to comment. Linklaters did not respond to a request for comment.

The report is due to be published on Tuesday.

READ MORE: "Fair" or "vague"? EU sizes up May's Brexit rights offer

Opposition parties are already objecting to the government’s plan to rely on so-called “Henry VIII powers”, named after the 16th-century monarch who ruled by proclamation. These would help the government to change the legislation with limited parliamentary scrutiny.

The financial services sector, Britain’s most profitable industry, is subject to detailed and technical legislation that could be undermined by individual amendments, the report says, adding that a statutory body should be created to deal with any unintended consequences or errors.

“The scope and scale of the exercise is unprecedented,” the report says. “It is inevitable that some issues will slip through the net and throw up illogicalities, gaps or ambiguities.”

Editing by David Goodman