06/07/2017 18:08 BST

CBI Fears Brexit 'Cliff-Edge' If UK Quits Single Market Before Deal Is Done

CBI wants a 'bridge' where existing EU relationship remains until deal done.

PA Archive/PA Images
CBI Director-General Carolyn Fairbairn

Britain’s biggest business group has urged Theresa May to avoid a disastrous “cliff-edge” when the UK quits the EU by keeping the country in the single market and customs union until a Brexit deal is done.

The CBI has suggested a transitional deal could be devised when the Article 50 process ends - and Britain leaves in March 2019 - that maintains the existing relationship between the UK and the EU.

Carolyn Fairbairn, Director-General of the CBI, wants a “bridge” to the new deal so that businesses only have to make one “transition”, which would otherwise be “wasteful, difficult and uncertain”.

It comes as Newsnight claimed a number of leading Brexiteers have voiced concerns over whether or not Britain will actually leave.

In a lecture at the London School of Economics, Fairbairn will argue that Brexit uncertainty is hurting the economy.

She will warn of a ”‘drip drip’ of investment decisions deferred or lost” and claim:

* A major European engineering and electronics firm have shelved plans to build a UK factory.

* An infrastructure firm is struggling to recruit skilled workers from the EU needed to build rails, roads and houses already planned.

She goes on a “no-deal Brexit” could increase export tariff costs by up to 6 billion pounds per year, and add up to 13 billion pounds to imports.

June saw a “triple whammy” of disappointing economic news as growth in both the service sector and construction and manufacturing industries slowed whilst inflation hit a four-year high of 2.9%, well above the Bank of England’s target of 2%.

The fall in the value of the pound in the wake of the Brexit referendum and the triggering of Article 50 has increased the cost of imports creating a squeeze on retailers’ profit margins. 

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Fairbairn will say:

“Instead of a cliff edge, the UK needs a bridge to the new EU deal. Even with the greatest possible goodwill on both sides, it’s impossible to imagine the detail will be clear by the end of March 2019. This is a time to be realistic.

“Our proposal is for the UK to seek to stay in the single market and a customs union until a final deal is in force. This would create a bridge to the new trading arrangement that, for businesses, feels like the road they are on. Because making two transitions – from where firms are now to a staging post and then again to a final deal – would be wasteful, difficult and uncertain in itself. One transition is better than two and certainty is better than uncertainty.

“Firms tell us this feels like common-sense. But if others have alternatives that deliver equivalent economic benefits, now is the time to put them on the table.

“The prize is more investment, more jobs and reduced uncertainty for firms here and in Europe.”

On the UK’s exit from the EU, she will say the aim is for the “most ambitious and comprehensive free trade deal ever agreed in history”.

“A deal which makes sure bakers in Northern Ireland can sell their bread to Dublin without delay and barriers. A deal where car manufacturers can continue to bring in parts from all over the EU without red tape.

“A deal where cosmetics firms can work under one set of standards across Europe. A deal where our services firms, which are 80% of our economy, can continue to export to their main market, in particular our financial services. Because barrier free trade brings jobs, growth and well-being to all parts of the UK and elsewhere in Europe.” 

In response, Keir Starmer MP, Labour’s Shadow Secretary of State for Exiting the EU, said:

“Today’s speech from the CBI underlines what Labour has been saying for months: that Theresa May’s Brexit strategy risks a cliff-edge for the economy and is a threat to jobs and investment.

“Labour agree that we need an early commitment to ensure strong transitional arrangements, and that these should be on similar terms to those we currently enjoy. Without that commitment, and without a bridge to new trading arrangements with the EU, there will be growing uncertainty for businesses and investment decisions will be delayed.

“Labour are clear that jobs and the economy must come first in the Brexit negotiations. It is time the Prime Minister and the Brexit Secretary listened to the growing concerns from businesses and the Treasury and changed their reckless approach.”

TUC General Secretary, Frances O’Grady, said:

“It’s crucial that we get the transition right as we leave the EU. So we need a transitional arrangement that will keep jobs and rights at work safe until a final deal is in place that will protect them for the long term. The common sense approach is to keep as much continuity as possible.

“A no-deal Brexit in 2019 would be devastating for jobs, and it would leave hard-won workers’ rights in danger of being watered down. An arrangement that keeps the UK in the single market for the period of the transition will keep workers’ rights safe. And it will protect jobs by keeping British exports free from tariffs and bureaucratic barriers.”