Brexit: No trade deal within two years should lead to delay of EU withdrawal, says British Chambers of Commerce

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UK business leaders are demanding that the timing of Brexit be pushed back if the Government proves unable to strike a comprehensive trade deal within the two-year negotiating period leading up to the split.

In a report based on feedback from more than 400 businesses, the British Chambers of Commerce said the Government needed to provide “solutions and certainty” to businesses before a divorce from the EU was finalised.

Amongst other things, the BCC demanded that the Government provide clarity for businesses on the “residence rights of existing EU workers” and companies’ abilities to hire from EU countries during the negotiation period.

“Business communities across the UK want practical considerations, not ideology or politics, at the heart of the Government's approach to Brexit negotiations,” Adam Marshall, director general of the BCC, said. “What’s debated in Westminster often isn’t what matters for most businesses.”

Theresa May has in the past stressed her commitment to avoiding a “disruptive cliff edge” for businesses when Britain leaves the EU, but crippling uncertainty triggered by the Prime Minister’s commitment to a hard Brexit has already caused some companies to carve out relocation plans.

In a letter to the Treasury Select Committee last month Andrew Bailey, chief executive of the Financial Conduct Authority, also warned of financial stability risks if the UK's financial passport were to be suddenly withdrawn in 2019 without transitional arrangements in place for banks and asset managers.

The are already signs of UK businesses taking action in response to a looming “hard Brexit”.

Last week, a damning report by professional services firm PwC showed that a third of UK manufacturing firms now plan to shift at least some operations out of the country.

And several big banks with major operations in London have hinted that a major reallocation of staff to Europe could be on the cards as a result of Britain leaving the EU, while surveys have shown that graduate recruitment into the UK is slowing too.

In a bid to combat a possible brain drain, and to stop businesses being saddled by significant costs after Brexit, the BCC in today’s report urges the Government to “aim to minimise tariffs, seek to avoid costly non-tariff barriers, grandfather existing EU free trade agreements with third countries, and expand the trade mission programme”.

It also says that the Government should guarantee that the tax office is “appropriately resourced to help businesses through the transition process”.

On regulation, the BCC demands that the Government ensures stability by incorporating existing EU regulations into UK law. That includes making sure that UK products remain competitive and continue to comply with the standard currently in place.

Finally, it calls on the Government to ensure that the UK maintains access to the European Investment Bank to prevent a “funding cliff edge” and that it does everything it can to avoid a return to “hard borders” with Northern Ireland that would hinder the free movement of people and goods.

At an event hosted by the UK Trade Policy Observatory (UKTPO) in London last week, experts warned that whatever the outcome of negotiations on trade, British firms will face expensive queues at customs borders after Brexit.

The experts said that while it might be legally possible to conclude new customs arrangements, this would not eliminate the need for firms to demonstrate to customs officers they are exempt from rules of origin and various product standards checks.

Those checks would inevitably lead to considerable disruption relative to the current frictionless cross-border goods trade with the EU.

Campaign group Open Britain threw its weight behind today's report, saying that businesses across Britain have repeatedly stressed that leaving the EU with no deal would be damaging for the economy, hit trade and cost jobs.

“If it proves impossible to agree a good free trade deal with Europe at the end of the Article 50 process, it is essential that we arrange a transitional deal that will maintain our current terms of trade and prevent the economy from going over a cliff edge,” said Anna Soubry, former small businesses minister and a leading supporter of Open Britain.

She said that this “underlines why MPs should have a meaningful vote on the final deal once negotiations have been completed”.

“We cannot be allowed to crash out with no deal at all without parliamentary approval.”