The EU has stepped up its “essential and urgent” contingency plans in the event of a no-deal Brexit and offered long-awaited clarity to the financial services sector over clearing.

The European Commission has started to implement its no-deal preparations given the “continued uncertainty” surrounding a Theresa May’s effort to get a Brexit deal through parliament, it said today.

Among its 14 measures to minimise disruption, the Commission confirmed reports that EU firms would be granted temporary access to London clearing houses for a period of 12 months after 29 March.

The no-deal measures also include plans to allow hauliers to carry freight by road into the EU for nine months without applying for permits and for British airlines to fly into and out of the EU but not within the bloc.

The Bank of England, trade bodies, and clearing houses had called for urgent clarity on temporary arrangements first mooted by the EU last month, in order to protect derivative contracts worth trillions of pounds being moved out of London.

The EU has now provided clarity in the form of a temporary equivalence agreement.

City of London Corporation policy chair Catherine McGuinness said: “This decision provides vital clarity to UK clearing houses and their customers in the EU.

“I am glad the Commission has started to address the serious cliff edge risks of a no deal scenario.”

She added: “The Commission now needs to take steps to address the significant risks to data transfers and contract continuity for insurance and uncleared derivatives at an EU level.”

The measures were also welcomed by the Association for Financial Markets in Europe (AFME), one of four trade bodies that wrote to Valdis Dombrovskis, the EU commissioner in charge of financial stability, earlier this month calling for clarity.

Chief executive Simon Lewis said: “This is a very important step to enable continued access for EEA firms to clearing and settlement services in a no deal Brexit scenario.

“While this addresses a significant risk, it is important for further action at EU and national level to mitigate against other risks and put in place cooperation arrangements between the EU and UK regulators.”

UK Finance chief executive Stephen Jones said: "Avoiding a severely damaging ‘no deal’ cliff edge remains the biggest priority for the banking and finance industry."

He added: "The Commission’s proposals recognise the need to safeguard financial stability but are limited and one-way only.

"Additional measures covering other cross-border services are therefore urgently needed to mitigate the remaining major risks to financial stability in the event of a ‘no deal’ Brexit.

“This is a matter of concern not just for the UK and EU but internationally, given the interconnectedness of the global financial system."

UK citizens living in the EU will also continue to be considered legal residents after Britain leaves on 29 March, the European Commission said today.