Royal Bank of Scotland chairman Howard Davies told ITV it would be “damaging” for the British economy and financial services industry if the UK’s Brexit process does not include a transitional arrangement with the European Union for the UK’s massive finance sector.

The UK’s financial services industry is lobbying hard for some kind of transitional agreement to cover the period of time between the UK completing Brexit negotiations and agreeing an eventual new trade deal with the EU.

“I think it is damaging if we don’t get a transitional deal because I think you will then see banks and financial institutions making decisions on the basis of uncertainty,” said Davies.

“They will not wait because they have to make a decision which will allow them to contiune to function in the event of a hard Brexit if that’s a possibility.

“So they will not sit back.

“They are currently making contingency plans and once you have got a contingency plan, hey, there is a risk you might implement it one day.”

He said RBS would only make any decisions on whether it should move any operations away from the UK when it knew whether it would be able to continue using the European Union’s “passporting” system which enables banks and financial institutions to sell across the EU.

Davies urged UK Prime Minister Theresa May to say more about the UK’s plans for transition away from EU membership.

“I can understand why you don’t wish to give your negotiation piosition away … but I think that she needs to say more on the transition …” added Davies.

“The end result is clear, but what is absolutely crucial is you don’t get there in a jerky and sudden way which  could be damaging to the economy both in the UK and Europe.”