The Government must rule out a Brexit that would see Britain leaving the European Union with no free trade agreement in place, the Institute of Directors says today (Wednesday).
The IoD, one of Britain’s biggest business groups, says leaving the EU with no deal and falling onto WTO rules would be a “poor substitute” for our current level of market access. They say the Government should consider extending the period of negotiation to avoid such an outcome.
They also say the Government should avoid an approach that prioritises “cherry-picking” separate deals for separate sectors of the UK economy. Research by Open Britain has found that this approach would not be good enough for our economy.
Commenting, Anna Soubry MP, leading supporter of Open Britain, said:
“When one of Britain’s leading business groups warns of the dangers of a cliff edge Brexit, politicians on all sides need to take heed of their advice.
“Leaving the European Union without a free trade arrangement in place would be bad news for our economy, erecting barriers to trade that would leave business and workers alike worse off.”
Notes to editors:
Research for Open Britain by the CEBR on the sector-by-sector approach to a UK-EU trade deal can be seen here: https://www.cebr.com/reports/how-the-uk-economys-key-sectors-link-to-the-eus-single-market/.
Key extracts from the report follow:
Businesses think leaving will be harmful and have started to take action:
“64% think leaving will be negative”
“20% have either decreased investment, delayed hiring plans or considered moving some business activity outside the UK since the referendum”
“among the 38 per cent of IoD members who import goods and/or services for use in their business activity, 75 per cent have seen the cost of these imports rise since the referendum” (due to the fall in Sterling)
Trade with the EU will no longer be burden-free:
“There are other ways of mitigating the scope for increased paperwork trails and customs checks within, or attached to, a free trade agreement between the UK and the EU. It is important to stress that this is about mitigation, rather than expecting the current relatively burden-free framework for moving goods between the UK and the EU to continue. This was unlikely whichever way the UK left the EU.”
Moving on to the WTO would make it “more likely” that firms would relocate to the EU:
“It will undoubtedly make it more likely that firms – for whom such terms would present an insurmountable cost addition – begin making contingency preparations to open up supplementary operations bases elsewhere in the EU.”
Warns businesses to start preparing for the “worst case scenario” of moving on to the WTO:
“For those businesses engaged in the EU goods trade, it is essential to begin exploring what extra paperwork dealing with the EU as a third country would entail. Planning for a worst-case scenario is necessary, therefore exploratory discussions with freight forwarders, customs brokers etc and other firms who already sell and buy products on WTO/MFN terms to assess the full range of potential cost implications should be part of forward planning.”
On sector-by-sector cherry picking:
“Seeking an arrangement with the EU which, on fundamental questions such as Single Market membership and a customs union, applies evenly across as many sectors and parts of the UK as possible, rather than cherry-picking access levels for different ones.”
WTO rules are no substitute for our current level of market access:
“What WTO rules do not provide any substitute for, however, is the current regulatory cooperation and mutual accreditation between various EU/UK agencies and bodies that expedite market access for a range of high-value products and services that the UK is renowned for producing. Ranging from chemicals and car parts to financial services and pharmaceuticals, market access in these highly regulated and heavily traded sectors is largely governed by agreements at the bilateral and regional levels.”